Who said equities are a good hedge versus inflation, aside from my nutsack? Last I checked, the previous period of American inflation was met with a staggered stock market. It was only until Reagan put the house in order, bringing down inflation, that stocks ripped higher. Sure, you can get a little commodity upside with inflation and some stocks will do well. However, if we are talking the sort of Zimbabwe-esque inflation that many of you dick suckers are talking about, WHO THE FUCK WILL BUY STOCKS THEN?
I swear, sometimes I feel like you people are fucking morons. Oh wait, this is America and the internets; you are fucking morons.
Oh, by the way, just because I said this market is due for a severe drop doesn’t mean that I am obligated to go homo-short banks right now. See, unlike you upright walking pigs, I am cognizant to the fact that the market moves methodically. It’s a rare, but recently common spectacle, to have large percentage gain drops and pops. I will adjust my portfolios accordingly, as I deem fit.
For now, people are buying the market. Trade rationally.
UPDATE: I sold out of FAZ for a loss.
UPDATE II: I bought 10,000 SD @ $6.80
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You need to go to your local business school library and do some reading.
Oh really?
Cite an American market that went up during periods of rapid inflation.
Commodity related stocks beat inflation and outperformed everything but physical gold during the runaway inflation of the 70’s. Look it up.
I said the market. Stocks will tank. These fuckers are buying all stocks, based upon inflation theories.
Agreed
Let’s approach this a different way. You have money, fly. You need to put it somewhere. Here are your options:
-Keep it cash (and be ravaged by 100% of the impact of inflation)
-Put it in bonds (and be ravaged by the majority of the impact of inflation due to rising yields
-Put it in equities (and only feel the portion of inflation that can’t be passed through to consumers)
Not to mention, equities with market power and pricing power will trade at a multiple premium in inflationary environments.
Do some research. T-Bills outperformed the S&P 500 during the 70’s as well.
Seems to me the price of beef/cattle skyrocketed too .. stock up on 2 1/2″ ribeyes if it comes to pass or risk being seen at Mickey D’s for an evening out.
i think this disagreement is one of timeframe.
Fly is right, equity markets don’t react favorable to sudden rushes of inflation.
Nutsack is right, in the fullness of time stocks have had a very consistent (kind of amazingly) rate of increase, adjusted for inflation, meaning that eventually they get back inflation + their trend gains, making them a good long term inflation hedge.
most companies enjoy some inflation (3-5%) as it makes pricing a cinch with paychecks rising annually but runaway only benefits commodity plays until no one can afford that ribeye or golden ring.
but wages eventually rise to match prices, not smoothly, not calmly, not without pain, but eventually.
And even in situations where massive inflation occured (europe or japan after WW2 comes to mind as a possibility) equity markets, adjusted for inflation, eventually recovered to the basic trendline that was in place before the inflation.
From 1800 to 2000, the us and british markets had eerily similar returns. in that time britain experienced world wars on its soil, fell from worlds ultimate power, lost reserve currency status, and i think had a currency default. The US rose to preeminent world power, became the reserve currency blah blah blah. And the markets tied.
Over very long periods of time, equities are good inflation hedges. Sudden significant inflation, though, as you mention, causes monstrous havoc in the short run.
Problem is I don’t have 200 years to let all this shit revert back to the mean.
Oh yeah? And how many companies made it through 1800-2000? Go ahead, home-brewed Buffett, make your picks. Check again in 2200.
Plan on holding the same stocks for 200 years do ya?
Or do you think here and there along the way a portfolio would rotate?
http://www.alleycompanyllc.com/assets/images/serice4_202.gif
Hey chartologists, is VXX looking for support or is it heading for a breakdown?
Don’t bother charting an ETN subject to contango and backwardation.
Is “backwardation” just a fancy way of saying “retardation”?
Backwardation is a downward sloping forward curve (as in an inverted yield curve) — which is the opposite of contango.
Please don’t forget to clarify what effect this phenomenon has on VXX. Would be interesting.
good explanation @
http://vixandmore.blogspot.com/2009/05/vxx-calculations-vix-futures-and-time.html
Good read, thanks. However seems this issue has very little (if any) effect on VXX.
ok, contango, backwardation, and roll-over costs. those will break typical charting of trendlines or support/resistance on VXX. If anything, chart the VIX and apply your analysis to VXX if you’d like.
Chart the VIX, which in essence is quantified emotions? No thanks.
VXX is an excellent long term short. Just short it and forget.
Agreed. I’m short from $31 most recently. I’ve been playing with paired trades of short VXX and long SH (or short SPY).
After a parabolic VIX move, often both positions will be in the black by day’s end (and as I check, right now too. VXX -1.91%, SPY -.02%)
You two are BANANAS.
I am as cool as a fucking big green crocodile lurking in the water closely watching feasting herbivorous creatures getting intoxicated and losing attention, getting far too close to dangerous muddy waters. The more you lose your fear, the more egregious my killing on VXX’s gonna be…
But now you are covered with oil.
overconfidence kills.
regurgitate R.W. now or pay the price for ingesting contaminated fish & fowl by ending up as inventory in a Bruno Magli shoe factory … you have been warned!
For some creatures greed outweighs fear. They don’t live long. Shown by nature. Proven by Darwin. Don’t be a fool falling to abyss with fiat money in hand. Indeud.
Volker killed inflation – not Reagan.
And the mkt did very well during the post-9/11 GWB inflation …maybe it just does well when inflation is unreported.
Fuck you. Respect Reagan NOW!!!
AND MORE
The gravatar is back!
or he’ll fire all the air traffic controllers and screw up your trip to St. Lucia ….
That was not rapid inflation. Show me a period when interest rates were 20% and the market went up, dick face.
Inflation and interest rates are two different things – they’re not related in the short run as the Bushies and the Asian savings glut taught most of us. Eat me.
Interest rates were high to fend off double digit inflation. Don’t get cute.
The market was not as connected back then, with the derivatives that are in place we will probably never see 20% interests again. Things that have changed.
Speed of Information.
More people in the financial industry.
More non-human market interaction.
and they will be high once again when the fiat currency tanks and inflation starts to run wild but you can still proper until rates hit the maginot line, no?
http://www.chartsrus.com/
prosper
Of course high interest rates kill the stock market
Who is going to invest when ‘risk free’ government bonds are 13% like the 80s?
I had a few of those, not much much money back then though
no. Historically high interest rates equal high stock market. It is counter intuitive but it’s reality.
Maybe all the inflationist fears start to die off and money piles into stocks. Look at 1979 when all that money in gold sold off. in the 80s as people sold gold stocks ripped higher even as interest rates ripped higher as well.
When money flows into american government because interest rates are high, the corrupt politicians make sure that money goes back into the businesses that elected them. Government will borrow and spend more than they have in bonds, so it really doesn’t matter as interest rates rise, stocks do too.
that’s in anticipation of the pending disinflation from such high rates … day following night or blue sky after storm
word > zero coupons
There was only one time in history when interest rates were 20%. The market tanked then because we had stag-flation and Jimmy Carter. Crap, maybe Jimmy Carter is back. So what does well with high inflation, which necessitates high interest rates, and slow economy? Gold? Collectables? Commodities? Farms and farmers? Wait– we have no inflation and low low interest rates. Maybe this is all different.
Guns and a disregard for authority.
You sound like Joey Zaza telling Michael Corleone that Anthony Meucci, NOT Alexander Graham Bell, invented the telephone.
iow, retarded.
It was an idea that was passed around during the 1970’s. I don’t know how popular it was as I only read about it as a little cub. I guess the interwebs are really green as they recycle everything?
Reagan would kick Obama-tards ass…he is a full blown disgrace to our country..hoping for riots soon
BP probably made the 20 billion by lying to public and buying puts on their own stock..more scumbags
I’d like an oil spill on the White House lawn.
we have one…our president.
That was a really intelligent comment. That’s why I come to this website to read brilliant commentary like this. It only underscores Le Fly’s point that the Internets are full of morons.
Here’s another one, “I pick the world up and i drop it on your effin head.”
agreed. so, so, very agreed
Had a revelation yesterday. Its unsafe to swing long this market until we SEE this 90% leak capture, which has been promised for weeks. I was very bullish until 24 hours ago.
Took an entry in VXX at 26.10, 25% portfolio allocation
That’s quite a switch for you, Panama. No more Dow 12K?
IF they cap that well 90%, yes—i’ll be bullish again. But, im losing faith.
They’ve underestimated the spill by 2-300%. They either cap it in the next few days, or the entire gulf economy could collapse. I have no idea how to find a bullish upside to that.
You mean 2-3000%…
Welcome.
I know nobody cares, but China is coming back from Vacation tonight, and they will have to digest some pretty sucky econ data that came out while they were play with their boats…could be interesting tonight whether they get all giddy over our Short Squeeze on the euro rally breaking the 200M or be really pissed off….
ZZZZZZZZZZZZZZZZZZZZZZZ
tiny everything!
http://www.youtube.com/watch?v=xZB7q8bBMvI
I care. Keep posting. Thanks.
Thank you Purdy and Kreizi
Me too, actually.
Me too nympho.
China is imperative to the price of oil. Continue, as I always like to browse through your thoughts.
Alvari…thanxs too…and Mr.Cain Thaler…it is an honor…and it will be very interesting w/China and Oil, last week they extended their Cash for Clunkers until Dec, it was set to end in May…..but they are still having a slower auto sales around, which makes sense w/the big drop of their markets so far.
Nympho, pardon me asking such an intimate question, but what is your primary source on China info? (I assume you don’t speak Mandarin). You seem to be aware of much more than floats on the surface, not on China, but markets in general. Very valuable.
Kreizi,Thank you for asking, I don’t waste my time reading stupid Analyst reports…I try to get to the source to everything by using the Google Translate feature….I read thru about 15 or 20 more global papers…I also don’t read WSJ either….I have a host of Industry Related Newsletters emailed to me everyday, not the stuff wall street reads. I am just one crazy stock junkie that has a strong passion for understanding this thing that Everyone says can’t be understood but just followed…..I am new to the game, just turned 3, so I still have a lot to learn vs the pros here.
Such reading and connecting the dots takes a lot of time. I’m impressed. For a toddler you are definitely very developed )) Keep on!
Sweet little 6 lb 8oz baby jesus, I am so fucking confused right now. 60% cash, 30% long, 10% hedged. Starting to get scrambled brains. I’m going to take my ball and go home for a week after I sell RINO (thx senor T.).
This is too much like random motion – flip a coin – I have some VXX and I am close to dumping it.
Looks like I am banking more of your coin today, Fly, as I sell more longs into strength. I purchased these longs in early June based on your PPT hybrid scores.
Don’t get me wrong. I don’t need the coin. But I do enjoy taking yours.
I think too many people on this board are overthinking the market.
I don’t know if I would call it thinking. Seems more like overreacting.
I would rather buy property with low rates than stocks, if i wasn’t a space alien magician of course.
Vxx lt short??!! You are out of your fucking mind
How do you add a gravatar pic?
See where it sez: “Speak Your Mind”? at the end of the line it sez “go get a gravatar!” click on the word gravatar and knock yourself out. That is all.
testing gravatar
Test failed. Or maybe you’re already banned by the future police for your yet unwritten comments.
Here’s my test
Show me new gravatar… no whammies… no whammies… stop
Awesome!
Advance copy of president’s 2:30 comments:
‘A month or so ago – a date which will live in infamy – the United States of America was suddenly and carelessly attacked by somewhere around 500 or 120,000 barrels of oil a day.
With confidence, with the unbounding determination of our people, we will form committees and seriously consider all ideas. So help us God.
With confidence in our armed forces, with the unbounding determination of our people, we will eventually do something unless it is politically risky.’
You’re brutal. You should stop it before they sic the Atty. General on you.
(laughter) nice.
We go higher because I say so.
Fly: any more outbursts from you and I will have to inisist that you ban yourself until you don’t!
People are shorting VXX?
What the…??
No, no. Let them do it. They probably think the real Black Swan event is when volatility becomes equal to zero.
Why is this at all surprising? Are people not allowed to have different opinions than yourself?
Sure, they can. Doesn’t mean I can’t LMAO @ them.
Fly: any more outbursts from you and I will have to inisist that you ban yourself until you don’t!
I like SD too but ain’t buying it until russell 2000 breaks its downtrend in the 60′ minutes. It was the leader that drove us higher and is the only index lagging now.
23 more Dow points and we can all pack it up for the day
sold out my GLDD
Obama says “buy BP” ! Never fall in love with a stock and buy those you hate the most.
Jesus Christ, it reeks of finance.yahoo.com in here today.
It won’t reek of yahoo finance until someone types in all caps, while quoting glenn beck
Smellers the feller.
There will never be risk, like there was in the 80’s, The risk is dispersed through derivatives. You can never cross the same river twice and this is an example of that.
Crossing the same river twice is easy, actually. You just turn around when you get to the other side.
That’s a lot of faith being placed on derivatives, to be had. Last I checked derivatives re-allocate exposure, not remove it.
Well I think that faith is based on 160+ years evidence. Yes it does re-allocate exposure so it is less risky for those issuing the loan, lower risk lower yield.
What evidence? Cough it up.
That post is some funny shit!
The Fly rules.