Markets move in whatever way induces the maximum pain on the maximum number of participants. Those players who mock “mainstream” opinion, if experiencing more success than the crowd, are bound to get overconfident and to see their ranks swell at just the wrong time. Then they themselves are the mainstream, and true contrarians are to be found on the other side of their trades.
Here are ten pillars of what I consider the “mainstream contrarian” movement that just ate a big slice of humble pie:
#1 The dollar is toast, and will keep falling until hyperinflation sets in.
#2 Gold and silver’s rise cannot be stopped until the US trade and budget deficits are brought under control and the debt is reduced–that is, never.
#3 Global oil production has peaked, so oil will continue ever upwards. Oh, and we’ll bomb Iran any day now.
#4 China and India’s growth will continue unabated, and with it, their demand for commodities at any price.
#5 Financial stocks will fall without bounces. Long live SKF!
#6 CPI vastly understates inflation. Just look at M3 or shadowstats.
#7 We are experiencing a return to 1970s style stagflation.
#8 US Treasury bonds are toast.
#9 Deflation cannot happen in a fiat money regime. Bernanke told us he wouldn’t allow it.
#10 When the depression comes and the dollar becomes worthless, the sheeple will awake to the truth about their government and demand their republic back, with Ron Paul as their leader and gold as money.
Here’s a tip for frustrated contrarians: Join the deflationists. We’re a super-exclusive club of curmudgeons and equal opportunity shorts. We are gold bugs, but just made some righteous dough shorting gold. We know that oil has peaked, but we shorted it anyway! We know China will rule us all, but we shorted commodities. We know the US is bankrupt, but we aren’t afraid to go long the 30-year.
In a few years, we’ll be pretty popular, but then I think most of us will have moved on, maybe to the hyperinflation camp. If recent history is any guide, the ones who make the most noise (ahem, Peter Schiff) will find it hardest to make the necessary corrections and self-contradictions before the next big pivot.
This should scare a few contrarians: Business Week is talking about double digit inflation. You know what that means.
http://www.businessweek.com/bwdaily/dnflash/content/aug2008/db20080815_021990.htm?chan=top+news_top+news+index_news+%2B+analysis
Today’s just released numbers for the PPI showed an annual inflation rate 0f 14.4% “Core” inflation running at 8.9%.
More shockingly, I just paid $4.08 for a loaf of bread. I really need for this deflation to hurry up and get here!
Howard, I didn’t know you were into the whole organic, artisanal food thing!
But seriously, I don’t think these food prices can hold out much longer, considering that there is about 13 cents worth of wheat in a 1 lb loaf, even with $8-a-bushel wheat. The rest is all labor and health care and all kinds of fat that will be trimmed when consumers start to balk at these prices, rather than pay them and complain.
We just paid $2.99 for a very good 2-person pizza with fresh tomatoes and pesto at a nice little place with table service. Their slightly fancier competitor 2 doors down charges $4.00 for an equally good pie with 2 toppings.
How is it that food is so much cheaper in Panama when the materials costs are the same? Wages are lower. They must fall a lot in the US if the country will ever be competitive again.
No, Barack is going to make sure that our wages stay high, and furthermore, he’s going to send each of us $1000 to help with our gasoline bills! How about that?
FDR’s wage controls didn’t reflate anything–they just gave us 25% unemployment. Even with Social Security checks today, job losses are deflationary.
People saved the last stimulus checks or paid down debt–something like 16% of the $150B was spent, and the US savings rate jumped to a whopping 2.6% in the second quarter. Even $1000 or $5000 more would not keep prices up with unemployment soaring. Any more would risk a bond market collapse, and the government needs its low rates to finance the deficit.