If not, it’ll will be a matter of the right timing…the deflationary story is indeed Real and inflation is made up of more than just increased paper notes, it’s about velocity and multiplier effect that make it happen…the Fed tried to prime the bank pump, but the banks haven’t turned it on – yet. The Fed’s charter is about low inflation and low unemployment. When will larger political forces break that public pledge.

It’s like we’re in Hooverville of the depression – deflationary. When will they come out of hiding and repudiate some of their public and personal debt? Who knows but we’ve always known this to be a matter of timing.

I’m currently hedged a little towards deflation but watchful, it’s sometimes darkest before the light.

It reminds me of when I was a teenager learning to drive, accelerating and breaking, not sure yet how to make a smooth ride…

Personally, I don’t know for a fact whether there will be hyperinflation. However, I think gold continues to look good just by virtue of who’s in the white house and congress. At the very least, it can’t be taxed and you don’t have to worry about having to be made whole by the fdic.

Coincidentally, I had come across old and more recent Hugh Hendry videos on YouTube. The guy is brilliant with a scintillating intelligence and a flair for the dramatic. He reminds me of Bill because of his breadth of knowledge and understanding of markets. He ties in history, philosophy and an encyclopedic knowledge of stats to buttress his case which is that that the environment is profoundly deflationary at this point. Why? Because the asset losses (home prices, 401K losses etc.) are far in excess of monetary expansion by the Fed. Dollars have simply ‘disappeared’ across the economy and there is in effect a “shortage” at current. He also feels that there are too many people buying into the inflation narrative and he likens it to people buying fire insurance when there is a flood. He has decided to underwrite the contrarian, deflationary narrative.

After three days of watching Hugh over and over again and pondering… I found myself swayed to his viewpoint and cancelled a series of trades I was about to make into commodities and foriegn currencies. Which were up today incidentally….

Hugh was so persuasive that I could not deny his reasoning. Then yesterday I pop in on the DR and find Bill in a financial existential crisis of the EXACT type I went through.

Hugh MADE 30% last year.

Go check out Hugh on YouTube and let’s hear your thoughts…

In Canada, housing took a fall of about 8-10% in 2008. When interest rates were brought down to 0% and variable rate mortgages went to 2%, home buyers flocked back to the markets. Up here we insure all mortgages nationally – works out to $42,000 per worker. So the banks are happy to lend. This spring we have entered into a new paradigm of home shopping. In the midst of a recession, home prices reached an all time high and sales/inventory ratio is the highest it has ever been since records have been kept.

It’s amazing how badly this will end. Canadian average home prices are $342,000 (currently about $300K US). Average household income is about $65,000 (currently about $60K US). A $120K household income will fetch first time buyers a $5-600K mortgage. All insured by my tax dollars.

Interesting eh. This downturn brought way too much stimulus to the Canadian banking. Any thoughts on how badly this will end?

http://www.americacanada.blogspot.com

It’s not an “if” it’s a “when” would you continue to give up real wealth and man hours for an eroding paper promise?

If you had been buying AAPL as I have been suggesting for some time here, you’d be doing quite well. Read between the lines. Companies like Apple are doing brisk business in what is mostly a discretionary arena and they continue to grow.

The sky didn’t fall – and it isn’t going to. Don’t miss a big run up again in the markets by clinging to such a doomsday scenario.