A sharp drop in consumer credit, very high productivity gain is indicators that deflation is taking hold of the economy from stagflation
Fred Day
Feb. 6, 2007

Stagflation dominated the economy for the last six years. The economy experienced inflation in all asset classes. It also experience stagnating job growth. Major deflation is always preceded by long time of stagflation. Stagflation is caused mostly by irregular and nonlinear resource distribution in the economy. The rich gets richer and poor gets poorer in real terms after adjusting for inflation. Sooner or later the rich cannot bear the burden of the whole economy. The economy starts collapsing into massive deflation as the rich tries to escape into guaranteed return scenarios. Stagflation changes into deflation when the risk takers in the economy decide to retire because of lack of opportunities.

That is exactly what is happening in the economy now. A sharp drop in consumer credit, very high productivity gain this week will confirm that deflation is finally in control of the economy.

The effects on the bond market is positive. The effect on the stock market is catastrophic. The wealthier sector of the economy has done well in boosting the stock market and the residential real estate. As residential real estate bubble collapsed, the wealthy sector is now in the mood to run for guaranteed returns. That is a tremendous gain in liquidity for the bond market.

A sharp drop in consumer credit, very high productivity gain is indicators that deflation is taking hold of the economy from stagflation
Fred Day
The effects on the bond market are positive. The effect on the stock market is catastrophic. As residential real estate bubble collapsed, the wealthy sector is now in the mood to run for guaranteed returns.
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A productivity gain of whopping 2% from the prior Quarter’s 0.2% can be bearish for Employment Reports in the next several months – bullish for bonds
Sam Adelton
The outsourcing and higher productivity has kept a tight lid on the wage inflation. The data will show the trend is alive and well.
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Merger and Acquisition in Hedge Funds is the last signature of mega bubble - State Street plans to buy Investors Financial Services for $4.5 billion
Special correspondent
State Street plans to buy Investors Financial Services for $4.5 billion in stock to become a big player in the hedge-fund realm. While analysts have a mixed feeling about the story, some interesting patterns are being recognized by the smart investors.
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History repeats - Corporate bond market sending the first signal of liquidity crunch since year 2001 – bearish for stocks, gold commodities and bonds
Peter Oberois
Something similar happened when in 1987 Greenspan became the new Fed Chairman. He put a lid on liquidity, raised rates and made the stock market to crash. He had the power to lower the rates, bring liquidity back and stabilize the market.
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Bush’s budget plan bearish for gold bullish for dollar and bond markets
Karen Zuba
But one thing Bush has done and he deserves a lot of credit for that. He has set the tone for the next several years for reducing budget deficit and trade deficit.
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Another good investment now is basic raw materials for food processing industry – look at the commodities and stay away from the stocks
Fred Day
The prices for raw ingredients for food will rise sharply. The chart patterns are clear. The prices of grains, the meats, milk, eggs, sugar, cocoa and other raw materials for the food processing industry are on the rise.
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