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About three weeks ago, I wrote a blog on stag-deflation. I said that the risk of deflation would lead to a depression. The Federal Reserve acted yesterday to lower rates to zero and told the markets that it will do whatever is necessary to avoid deflation. The results of these actions will take hold next year. Christmas is one week away and a sampling of retail stores shows massive deflation in prices. Sample the prices at Macys, Bloomingdales, Neiman Marcus, Saks, the Gap, and Best Buy. The sales show record declines approaching 60%-80% off of original price. In fifteen days we will be adjusting to the new realty of 2009. BMW is currently offering interest free loans as an incentive to purchase their automobiles. The first quarter of 2009 will be extremely depressing with more unemployment. As we enter the second quarter of 2009, hopefully we will see the credit crunch start to ease. The way out of deflation is inflation. Therefore, don't wish for lower prices as that will indicate that you assets are worth less (not worthless).
Random thoughts....Chrysler is closing its' manufacturing plants for the next thirty days..GM will survive in 2009 as will Ford....Chrysler will be history.....The most profitable sectors for next year will be led by Financials....I still think we have a shot at closing above 9,000 before Christmas.....rally could go to 9,600 by January 1.....
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2 comments:
Ugh...Deflation! Why do I picture a tire being deflated.
These are scary times. What will OBAMA do to smooth things over?
No one wants to spend. As I heard in the movie DOUBT last night and from what FDR said in his 1st inaugural address:
"The Only Thing We Have to FEAR is FEAR itself."
History matters:
http://historymatters.gmu.edu/d/5057/
Lovin' your blog...it makes me think about what WE CAN DO...and what OTHERS MUST DO.
Hugs,
M
i think the archive you wirte is very good, but i think it will be better if you can say more..hehe,love your blog,,,
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