Financial topics

[vincecate]

1. This doesn't show that E/P is correlated to inflation, which is
what you were claiming.

2. I'm not sure what "CPI adjusted E10/P" means, since CPI is
factored into both the numerator and the denominator.

3. This is the nutty "Fed Model" investment strategy, which
I wrote about several times. It's based on a single paragraph
in a 1997 Fed report.

This E10/P is earnings for last 10 years adjusted for inflation then averaged and divided by stock price. It gets you a number that is comparable to interest which is a sort of earnings divided by price thing.

This just shows that E10/P is correlated to 10 year bond rates. I would then have to show that bond rates are correlated to inflation to prove what I was claiming but that seemed so clear I have not done so.

Calling this a nutty investment strategy based on a single paragraph when there is data in the article showing the correlation seems odd. Bonds and stocks compete for investment. It makes sense that when yields are low on bonds the earnings relative to price would be low on stocks as well, which means a high P/E. When inflation is high, and interest rates are high, like 1980, then stocks have to have a high earnings per investment to look competitive, which means a low P/E. This is not just some nutty idea based on a single paragraph someplace.

[Higgenbotham]

However, from the point of view of generational theory, things
are going to get much worse anyway. So the question for me is
this: Would it have been better to have no QE, so that the
inevitable crash would be more painful, but the worst would
be over more quickly? Or was it a good idea to have QE to
give institutions several additional years to prepare for
the inevitable crash, by hoarding cash and creating a stable
work force, but prolonging the agony?

As I said, I've debated this with myself many times, and I
still have no idea what the answer is.

John

To me, the answer to this is self-evident. QE will increase disorder in the world system and there is already evidence that it has. The fundamental reason for this is that QE increases the intensity of every known negative human emotion or characteristic: greed, sloth, envy, fear, hatred, etc., while at the same time decreasing the intensity of every known positive human emotion or characteristic.

[Higgenbotham]

For anyone who wants to get a good understanding of current economic issues, this morning I've been going through Martin Armstrong's writings from August 1 to date and would highly recommend reading all of them:

http://www.martinarmstrong.org/economic_projections.htm

One in particular for those who don't have time to read everything:

http://www.send2web.com/files/Direct%20 ... 6-2011.pdf

Gold cycles:

http://www.send2web.com/files/Plunging% ... 5-2011.pdf
http://www.send2web.com/files/Gold%2008-27-2011.pdf

He touches on many issues that have been discussed here recently.

[aedens]

http://metanoia-films.org/humanresources.php
Sample:
I work for a call center in bangalore and I see every month more and more US companies are increasing their numbers here. I feel pity for US people.
Their direct loss is our direct gain (for now). Our call center and software collegues are almost following US baby boomers life style now. You should see it for your self. The Indian economy (esp bangalore) is running from spill-over effect of the (dollar denominated) jobs. qe1 and qe2 effects is still not over on the indian economy (inflation). I don't know why RBI is desperate to keep rupee at 45 levels. We have 121 crore (1.21 billion) people and only 1 % of the population is directly and indirectly dependent on the export industry. They can allow the rupee to appreciate (free market) and decrease the fuel rate (import). All major banks and retail outlets are shipping their jobs (back end - call center jobs) to india. 99.95 % people in india think RECESSION is over and they think that every thing is fine. They also think that USA is a great-rich country with not debt. People here will not know what hit them. I'm sorry for them. Our company and others in bangalore are recruiting day and night (thousands of jobs)

When they print "United States" it will raise inflationary pressure much more there in India.
The point I am trying to make is the vacuum effect as things move by as in displacement wave
and the wake of it collasp.

Pockets or craterings. We know the consequences already as we posted the bulldozing effects.
http://www.youtube.com/watch?v=maouTP8v ... KMG_UOfm9U

http://www.youtube.com/watch?v=A_hiEvTN ... re=related
Also I wonder if the smart lady, Ms. Tyson ever got it even today.
It was subsidized to prevent left leaning areas and the irony is as we know
it took root here from the second hand dealers called intellectuals.
These political talking heads have decimated this nation. There Political logic then and today
will leave you as Jefferson warned. Homeless...

IBM nesting redundant employees as Old53 conveys may defer the timeline
but the wave of greed has overwelmed since we past the tipping point.
We have the mindset captured on the democratic party's historical
mindset and upcoming speech. BI is also quicker than I assumed.
ht/CD

[OLD1953]

Disorder, yes, things are moving into a more chaotic state as energy (money) is added to the system. To form a more ordered state would require removal of that energy, and human society won't settle down until that energy is removed.

And that's the problem I have with the statements about things moving or shifting or changing around the world. The current situation is too chaotic for any of these statements to be true for a long period, unless they show a trend to order. The former status of semi-chaos is already dissolved and gone. Dating of everything becomes critical, as truth yesterday is not truth today.

Those who successfully adapt to this period of very rapid change may survive, those who do not adapt most certainly will not.

Suppose you held a million in blue chips in 1926, and went to live in luxurious isolation for ten years? Odds were, you'd have left your island to find out you had not one cent! Buy and hold in that environment was a sentence of poverty! And it was the prevailing wisdom of the early twenties as it was in the early noughts of this century!

I have speculated a bit that what's actually holding things together now is the sum total of all the computer power that is now available that looks for short patterns in this financial and social chaos. But finding short profit windows does not equate to stability. The collapse to orderly systems requires the removal of excess energy in some manner. Examination of the record shows deflation winning as the energy destroyer, though in this chaos it is possible (though unlikely IMHO) for that trend to reverse.

[aedens]

Well, I was wrong to think the auto sales would increase as it did. True it was month over month data so time will direct its dicipline not me.
No hot air at all to the amount of lost capital we have all seen and to the rent stocks as we do. I assume if you defined alpha you would never get a agreement anyway. I conveyed none other than hundreds of years of warning on Banks as we all have. Why would you trust any Bank or for that matter your faith in them in the long run since there is no unpopular Government. I guess it would suffice to say risk on risk off with 1 percent playing the so called second hand dealers on there intellectual conveyances. They do not get it, or do they care. It shows, and when the Office of the President conveys next week there calculated and calibrated ideological blathering this will be the next axis point for there decisions not ours. It is past politics now if they admit it or not. Trust is the consequences of action that any governement over states there funtion of appropiate worth and value of a few funtions they should pocess anyway. Let get to the fact of the matter, more are decrepit in thinking Governments are a benefit than sanity in local solutions we pursue. I reread Hayeks work and he was correct more than there so called change. Americans deserve all they voted for.

[OLD1953]

To vote for a solution means you know the problem and someone has suggested a plan to deal with it. I haven't heard anyone in politics clearly state the problem without lying, as of yet, and I've yet to hear anyone suggest a real world (not fantasy land) solution.

[RDRUNR]

To me, the answer to this is self-evident. QE will increase disorder in the world system and there is already evidence that it has. The fundamental reason for this is that QE increases the intensity of every known negative human emotion or characteristic: greed, sloth, envy, fear, hatred, etc., while at the same time decreasing the intensity of every known positive human emotion or characteristic.

That is a really good way of putting it. I've actively followed this type of trend for the past 6 years; when you put more money in the system, people get more "negative human emotion or characteristics" and in turn want more money (never ending negative cycle). It can be seen (to me) in any "investment" assets.

Too much money changes people in negative ways. Few can have a lot and be unaffected by it.

I vote for no QE anymore, not only is QE not solving anything but is making the world a worse place to live in.

[Carl Lieberman]

I've been off the grid for a few days. Euro markets are getting interesting.

John, thanks for posting about your job search experience.
Congrats for landing a job commensurate with your skills and desires.

[vincecate]

To vote for a solution means you know the problem and someone has suggested a plan to deal with it. I haven't heard anyone in politics clearly state the problem without lying, as of yet, and I've yet to hear anyone suggest a real world (not fantasy land) solution.

My theory is that that in Democracies with fiat money governments grow as a percentage of the economy. The larger the percentage of the economy they are, the slower the growth of the economy. At some point the government is so big that the economy starts shrinking and things fall apart. I think we are at that point now. I don't think it is really possible to shrink the government enough in an orderly controlled way, so things sort of have to fall apart.

http://pair.offshore.ai/38yearcycle/#governments