Monday, August 08, 2016

Mish Shedlock* On Hyperinflation 
"2.2 trillion of it is parked at the Fed as excess reserves. It’s almost as if the Fed printed $2 trillion and buried it at the bottom of the ocean. Actually, it’s not quite that benign, because banks do collect interest on the reserves. Also, the Fed asset buildup artificially lowered interest rates while fostering asset bubbles. However, the net effect is hardly in the hyperinflation category as the following chart shows .. For those who wish to think, please think about the ramifications of another major asset bubble bust, and what that will mean in 'practical terms', notably: asset prices will get cheaper, a dollar will buy more assets .. The mess in Europe, Japan, and China appear more likely to come to the forefront sooner than the mess in the U.S.. .. My central thesis is asset bubbles pop, sooner or later, and that by definition is deflationary. This model was correct in the finncial crisis and unless bubbles expand infinitely, forever, it will be correct again .. Some of us are inflationists, some of us are hyperinflationists, and one of us is a deflationist (at the moment but also for the foreseeable future), but we all agree that gold is an asset that deserves a strong percentage of your wealth preservation strategy. There is no need to put wild targets on the price of gold or make wild hyperinflation claims. Hyped up claims don’t serve any useful purpose. For now, we can agree (I think), that central banks will respond with a vengeance to deflation threats, and gold will be a beneficiary."
LINK HERE to the commentary

1 comment:

Anonymous said...

In most successful investments, everyone earns a very good return, from the early, visionary risk-takers forward. So it will likely be with Uber, whose early investors seem poised to make a phenomenal profit in an IPO. If you invested $10,000 in the Series A round in February 2011, it would be worth about $10 million if Uber were to go public at today’s valuation.

Among those in Series A and B was Benchmark Capital’s Bill Gurley. In April, Gurley wrote a 5,600-word blog post that, although mentioning Uber once in a complimentary way, reads like a thinly veiled tirade against the startup’s more recent investors. In the post, Gurley, who declined to comment for this story, grouses about the exploitation of “high-flying” unicorns (startups with valuations of $1 billion or more) by “sophisticated and opportunistic” late-round investors who swoop in and impose “dirty” terms that can hurt everyone else, and put the startup itself at risk. The post followed a year of rants about the failure of high-value startups to go public.
No wonder, because Uber investors are starting to lose faith in the current valuation: Six of the 16 mutual funds that own Uber shares have appraised them at prices implying a lower valuation, according to data compiled for Quartz by Morningstar. In regulatory reports filed from March through May, Putnam and Optimum valued their Uber holdings at prices 10% lower than the going valuation, Morningstar said. John Hancock reported its shares at 7% below. Most of the mutual funds bought during earlier rounds, so their holdings are still in the money. But that is not the case for T. Rowe Price, which obtained shares at the December 2015 peak; just four months later, T. Rowe Price marked those holdings down by 6%.

this is where the hyper inflation is........