Global bear rally of 2009 will end as Japan’s hyperinflation rips economy to pieces

 We start with a short column by Ambrose Evans-Pritchard of the London Telegraph giving us a quick run down of the problems faced around the globe. He thinks the #1 problem is Japan, and I more or less agree. I have written about Japan many times in the past few years. In my speeches I refer to Japan as a bug in search of a windshield. I am not so sure about the timing, however, as the economic and fiscal insanity that is Japan may be able to go on for longer than many think possible. But to me it is not a question of whether there will be a crisis, but when there will be one. This year? 2011? 2012? I doubt Japan makes it to the middle of the decade with a very serious and sad day of reckoning.

Die Billionenbombe

Von Michael Mross MM News

Monday, 23. November 2009

Das Geld, die Bombe und DER SPIEGEL: „Warum nach der Jahrhundertkrise schon die nächste droht“. – Eine fehlerhafte Problemanalyse, verursacht durch fatale Unkenntnis des Geldsystems.  In seiner jüngsten Ausgabe analysiert das Massenblatt Ursachen und Auswirkungen der Finanzkrise, die in Wirklichkeit eine Geldsystemkrise ist. Billionenbombe Spiegel Dass nach der „Jahrhundertkrise schon die nächste droht“ ist keineswegs – wie das Magazin berichtet – Gier und Wahn in der Bankenlandschaft geschuldet, sondern einzig den dem Geldsystem innewohnenden Mechanismen.

Should Germany be Worried About Inflation or Deflation?

On November 26, 2009, Germany’s statistical office Destatis announced that according to flash estimates, the German consumer price index (CPI) decreased 0.2% m/m in November 2009.  Most of the downward pressure came from core components with clothing and household goods prices falling the most, pointing at the considerable slack still prevalent in the German economy. On a year-over-year basis, inflation increased by 0.3% y/y in November. Harmonized Index of Consumer Prices (HICP), the indicator of price stability for the ECB, posted a 0.4% y/y gain in November 2009. Compared with October 2009, the HICP declined by 0.1% m/m.

U.S. Inflation Trends: Deflation, Disinflation, Reflation or High Inflation?

• Core CPI (excluding food and energy) inflation inched up to 1.7% y/y in October 2009 from 1.5% in September due to a 1.7% m/m increase in vehicle prices. Owner equivalent rent remained unchanged after the indexes for rent turned down in September for the first time since 1992. Headline CPI decreased 0.2% y/y in October 2009 (not seasonally adjusted) after a 1.3% y/y contraction in September. Food prices increased 0.1% m/m, and energy prices increased 1.5% m/m. Headline deflation bottomed at -2.1% y/y in July 2009, the largest annual contraction since 1949, led by a decline in energy prices. Headline PPI for finished goods fell 1.9% y/y in October 2009, a moderation from July’s 6.8% drop—the steepest since records began in 1947. Core PPI inflation for finished goods fell into deflation, dipping 0.6% m/m in October 2009, while the annual rate slowed to 0.7%, the lowest since 2004.

Just Desserts and Markets Being Silly Again

From John Mauldin’s Outside the Box, 2/11 EXTRAORDINARY ANALYSIS!!! (hfk)

by Jeremy Grantham

Just Desserts

I can’t tell you how surprised, even embarrassed I was to get the Nobel Prize in chemistry. Yes, I had passed the dreaded chemistry A-level for 18-year-olds back in England in 1958. But did they realize it was my third attempt? And, yes, I will take this honor as encouragement to do some serious thinking on the topic. I will also invest the award to help save the planet. Perhaps that was really the Nobel Committee’s sneaky motive, since there are regrettably no green awards yet. Still, all in all, it didn’t seem deserved. And then it occurred to me. Isn’t that the point these days: that rewards do not at all reflect our just desserts? Let’s review some of the more obvious examples.

1. For Missing the Unmissable

Bernanke, the most passionate cheerleader of Greenspan’s follies, is picked as his replacement, partly, it seems, for his belief that U.S. house prices would never decline and that at their peak in late 2005 they largely just reflected the unusual strength of the U.S. economy. As well as missing on his very own this 3-sigma (100-year) event in housing, he was completely clueless as to the potential disastrous interactions among lower house prices, new opaque financial instruments, heroically increased mortgages, lower lending standards, and internationally networked distribution. For these accumulated benefits to society, he was reappointed! So, yes, after the fashion of his mentor, he was lavish with help as the bubble burst. And how can we so quickly forget the very painful consequences of the previous lavishing after the 2000 bubble? Rewarding Bernanke is like reappointing the Titanic’s captain for facilitating an orderly disembarkation of the sinking ship (let’s pretend that happened) while ignoring the fact that he had charged recklessly through dark and dangerous waters.

Catching the Argentinian Disease

aus John Mauldin’s Newsletter:

I have been in South America this week, speaking nine times in five days, interspersed with lots of meetings. The conversation kept coming back to the prospects for the dollar, but I was just as interested in talking with money managers and business people who had experienced the hyperinflation of Argentina and Brazil. How could such a thing happen? As it turned out, I was reading a rather remarkable book that addressed that question. There are those who believe that the United States is headed for hyperinflation because of our large and growing government fiscal deficit and massive future liabilities (as much as $56 trillion) for Medicare and Social Security.

This week, we will look at the Argentinian experience and ask ourselves whether „it“ – hyperinflation – can happen here.

The Ascent of Money

Amerikaner stammen aus Italien, Europäer aus Japan

Na, sonst kann man ja selten einer Meinung sein mit den Schlussfolgerungen des Herrn Sinn, aber diesmal könnte er mit seiner Analyse Recht haben:
Hans-Werner Sinn 

MÜNCHEN – Das amerikanische Geschäftsmodell ist zusammengebrochen. Während der letzten Jahre haben sich die USA riesige Summen vom Rest der Welt geliehen. Allein im Jahr 2008 betrugen der Nettokapitalimport über 800 Mrd. Dollar. Das Geld wurde hauptsächlich durch den Verkauf von hypothekengesicherten Wertpapieren (ABS) und darauf aufbauenden strukturierten Wertpapieren (CDO erzielt, die Forderungen gegen Forderungen gegen amerikanische Hausbesitzer waren (genauer: nur mehrstufige Forderungen gegen die Häuser selbst, da die Besitzer durch die regressfreien Kredite vor einer Durchgriffshaftung geschützt waren). Inzwischen ist jedoch der Markt für solche Wertpapiere verschwunden. Während im Jahr 2006 der Umfang der Neuemissionen noch 1,9 Billionen Dollar betrug, dürfte das Volumen im Jahr 2009 nach den jüngsten Schätzungen des IWF nur noch 50 Milliarden Dollar betragen. Der Markt ist um 97% geschrumpft. Keine andere Zahl sagt so viel über die Katastrophe des amerikanischen Finanzsystems aus wie diese.

Liquor before Beer – In the Clear

Value Investing Congress – David Einhorn, Greenlight Capital One of the nice aspects of trying to solve investment puzzles is recognizing that even though I am not always going to be right, I don’t have to be. Decent portfolio management allows for some bad luck and some bad decisions. When something does go wrong, I like to think about the bad decisions and learn from them so that hopefully I don’t repeat the same mistakes. This leaves me plenty of room to make fresh mistakes going forward. I’d like to start today by reviewing a bad decision I made and share with you what I’ve learned from that error and how I am attempting to apply the lessons to improve our funds’ prospects.

The Best of Times

from John Mauldin’s weekly newsletter:

What’s a Fed to do? We get talk about tightening and taking away the easy credit, but we got the fourth largest monetization on record last week. This week we examine the elements of deflation, look at some banking statistics that are not optimistic, and then I write a reply to my great friend Bill Bonner about why it’s the best of times to be young. I think you will get a few thought-provoking ideas here and there.

The Elements of Deflation

I get asked at almost every venue where I stop, whether I think we will see inflation, or deflation. And I answer, „Yes.“ And I am not trying to be funny. I think the primary forces in the developed world now are deflationary. When asked if I don’t think that the Fed monetizing debt of all kinds won’t eventually be inflationary, I answer, „We better hope so!“

Killing the Goose

Samstag, 10. Oktober 2009, 05:07:00 | John Mauldin

Killing the Goose
What Were We Thinking?
Let’s Play Turn It Around
„The tipping point for hyperinflation occurs when the government’s deficit exceed 40% of its expenditures.“

Peggy Noonan, maybe the most gifted essayist of our time, wrote a few weeks ago about the vague concern that many of us have that the monster looming up ahead of us has the potential (my interpretation) for not just plucking a few feathers from the goose that lays the golden egg (the US free-market economy), or stealing a few more of the valuable eggs, but of actually killing the goose. Today we look at the possibility that the fiscal path of the enormous US government deficits we are on could indeed kill the goose, or harm it so badly it will make the lost decades that Japan has suffered seem like a stroll in the park.