Deflation Watch pt 152

sabretoothtigger

If you want to see deflation this is what you should use, Yuan denominated bank accounts now available in UK
I thought China didnt allow others to use their currency, so maybe its just a business thing

http://online.wsj.com/article/BT-CO-20120530-712502.html

They are trying to make UK part of a trading point for the East as any continuing shift in power we will need to replace lost business from our links to Euro and Dollar


However, Dollars suffice for now as a proxy ?

Amanda Drury ‏@MandyCNBC
US crude has now fallen 20% from peak..officially in bear mkt...on course for biggest mthly % drop in 2 yrs. #oil

China is to form direct trade without Dollars to/from Japan. They have done this a number of times now, it is a declining withdrawal of backing to the dollar much like the departure from gold but in actual trade this time

sabretoothtigger

More deflation or is it really just a collapse in normal fundmentals

MARKET TALK: Record Low Yield? UBS Thinks 10-Yr Tsy Yield Still High
10:35 (Dow Jones) When UBS analysts put out a call several weeks ago that Treasury yields were still too high, many took the call as an outlier. But the sharp drop in the yields -- with 10-yr smashing record lows over the past three sessions -- lent support to their musings. Guess what? The bank just released a new note Friday arguing that the 10-yr yield -- at 1.48% -- is still high and their model suggests a fair value of 1.2%. The analysts admit that the 1.2% level "sounds too aggressive," and that a fall to around 1.4% makes more sense at the moment. (min.zeng@dowjones.com)


Call us at (212) 416-3100 or email bradley.davis@dowjones.com

(END) Dow Jones Newswires

June 01, 2012 10:35 ET (14:35 GMT)

A sensible yield over 10 years should be 10% which is less then 1% return a year. That would be cheap still really, excluding the value depreciation from price escalation




The Euro traded weighted index is the lowest for a decade. Apparently this is good news, it shows good value ?
Germany still sells a couple bits and bobs, buyers are getting good value on every purchase I guess so theres no reason for a further collapse on products the world wants and needs, right :?

It does mean German workers are likely lower paid then for a long time and probably spitting at the prospect of handing out any further sweet deals to rioters for doing nothing but offering threats to destabilise

Fed Submitted/Accepted Ratio 12.90
(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2012 11:02 ET (15:02 GMT)

michaels

I believe the quoted yields are annual not over the life of the bond...

Generali

michaels wrote: »

I believe the quoted yields are annual not over the life of the bond...

They are. They are calculated to include the coupon (interest payments) over the life of the bond and also to reflect that you are probably not paying £100 for a bond with a £100 face value.

All that is then turned into a yield, being an equivalent annual interest rate based on the cash flows you are going to get over the life of the bond.

sabretoothtigger

I knew about the capital adjustment in the yield, forgot it was an annual rate. That makes it not nearly as extreme though its still below annual inflation.
I cant just compound that yield to get the 10 year rate, that'd make it near 16% which cant be right

Its just that not much would surprise me now, I dont think its all calculated on honest returns. The majority buyer of bonds are forced to do so, the american tax payer and their pension funds and so on.
Its just one step behind the Argentina solution which is government debt owned by the people by any means accessible to the state. In WW2 this was done voluntarily but now any value lost is borne by people with no say or knowledge even of the matter.
In Japan they do it voluntarily I think yet they must spend money in retirement. Since Japan owns much foreign debt itself, I see that as the loose grenade pin in it all

We might think events are deflation but if massive value is being lost at some point, isnt that devaluation of the monetary worth and so inflation





Greenspan on the Euro contagion. Doesnt he sound a bit Austrian here, out of power he has the luxury of reverting to his prior ideas away from political pressure to constantly ease?
http://www.youtube.com/watch?v=8pR8a0dIHfA&feature=channel&list=UL

At 4:00 he critises the fed's expanding balance sheet indirectly it seems
At the end he says USA is more efficent in directing private capital towards growth then the command economy of China, in fact he says China has no means to do what USA does. Really?



This is incredible. 40% gain in Sterling index linked bonds over 3 years

Over 5 years its 50% with sterling index itself dropping from 100 to 83 since 2005

the average house price 3.85 times the average household income – back then it was just 2.59 times household income.
Many people underestimate the effect of inflation over longer periods of time – for instance, £1 in 1952 would be worth £24.34 today.
But perhaps it is the reverse way of looking at this which shows how the purchasing power of money decreases over time. What we can buy with £1 today would have cost just 4p back then.

http://www.telegraph.co.uk/finance/personalfinance/savings/9308562/Diamond-Jubilee-how-much-was-1-worth-in-1952.html

Generali

The yield pays out rather than being used to increase the value of the bond.

The calculation is:

(annual coupon/market price) x 100 + (100 - Market price)/Years to maturity)

So it's the current yield plus or minus the capital gain or loss that will be realized on maturity divided by years to maturity.

That's a bit of a simplification as it should be the net present value of the capital gain or loss divided by time to maturity but it'll do.

Generali

Well deflation could still be a risk in the UK:

AndyGuil

That is going to keep the base rate down.

sabretoothtigger

I'll believe in deflation when petrol or energy costs fall year on year. I know thats a global market but so are alot of things nowadays


I have sterling breaking out of a downtrend in the last 6 months.
That'd match deflationary prospects though its mainly reliant on a continually weak dollar I think more then genuine strength on our part elsewhere in the world

£1 in 1952 would be worth £24.34 today.

long term trends are most reliable

michaels

Just because I am in a minority of one doesn't necessarily mean I am wrong.

Whilst most are getting very excited about the US interest rate 'hike' and predicting the UK will rapidly follow suit I thought I would look at UK shop prices and volumes:

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/november-2015/index.html

YoY volumes up a healthy 5%...and yet value is only up 1.4% because prices are down 3.3% - to me shop prices down 3.3% in a year is getting pretty close to the level of deflation where you put off buying stuff cos it will be cheaper next year.

Still we are definitely going to see increasing interest rates to head off inflation and a note to history watchers Japan never saw any false dawns and attempts at monetary tightening that soon had to be reversed after all....