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Best of the Exchange: Inflations True Cost, Dumbing Down the Market and Contrarian Signals


Minyans debate the state of the financial world.

With the launch of The Exchange, Minyans now have a forum in which to express their viewpoints, comment on articles and meet other like-minded financial souls. Minyanville publishes "A Best of the Exchange" each Friday to highlight the many insightful posts and discussions going on behind the scenes.

Become part of The Exchange and let your voice be heard!

(Editor's Note: Some of the following posts have been modified slightly from their original form.)

With Professor Depew out on paternity leave (congrats Pep!), Minyanville's editorial staff thought we should do him the honor of reprinting one of the finest Five Things he's written. This philosophical pontification generated more discussion on The Exchange than any piece past or since. It's worth a read.

Minyan Sek:

Congratulations on your very able column, the first instance in my knowledge where meaning has been infused to the work of this great impostor, Baudrillard. Really well done.

Now, could it be that we're at a fifth phase, where originals became the simulacra of their own simulacra and start the cycle again? It would befit Baudrillard's way of thinking ("
nothing exists!" instead of "I was wrong, I'm not Maoist anymore") and explain reality:

The futures market has way more meaning now than its pale replica, securities. For the moment, securities have obediently followed the price of futures regardless of fundamentals, but everybody is worried should the impertinent things "decouple" and crash our new toy, the object ... it: Credit.

Minyan Terry:

Cool verbiage, but I think it's wishful thinking that the fashion industry is going to embrace "average" looking people to model their wares. They may "dabble" in it now and then but the bottom line is they need to make a profit and all those lost souls "abandoned and misunderstood" by their parents (12 - 18 year old girls) need to feel special. The fashion industry provides just that by making them feel less than perfect.

The sage Mr. Practical is not convinced government bailouts can avert a financial crisis. In fact, he explains that the troubles have been building for years, and only a deflationary contraction of excess credit can set things right again.

Minayn Paul:

I agree with you 100%.

I'm an Australian. I've done fantastically well in the market over the last few years and personally have nothing to worry about. But I'm terrified about where the world is heading. America seems determined not to face up to reality and that's going to make things that much worse for America and for the rest of the world.

I have great respect for you and for this site. You have done your best. All you can do is look after yourself because no one wants to listen.

Minyan Matt:

I agree with the media having to shoulder much of the blame here. They've failed in their duty to provide quality information to the population. The level of corruption in the media industry over the last 20 years is appaling. It's now, for all intents and purposes, a branch of the government.

The Internet is the last bastion, and you (among others at MV) have done a great job in trying to sipher through all the BS (a true journalist) and tell people what's happening.

Minyan Simon:

Not to knitpick but I wanted to correct a common confusion between negative and positive feedback loops. A negative feedback loop moderates perturbation while a positive feedback loop amplifies and reinforces it causing an explosive outcome.

Credit markets have been experiencing a positive feedback loop. Despite of its deceptive name, a positive feedback loop, like a positive diagnosis, is not good news.

Otherwise, this is another thoughtful piece from Mr. Practical.

Professor Goepfert took an interesting look at the implications of historically weak small-business sentiment. Periods of extreme pessimism have often been good buying opportunities, and he wonders if it may pay off to take the contrarian approach to all the gloom.

Minyan David:

ll this analysis based on past history implies that nothing of significance has changed in the economy.

The problem is that significant and pernicious change has taken place. We are facing unprecedented debt, energy costs, a housing glut and a current account deficit with no end in sight ...all inside our shiny, new "service economy!"

Please, I'm begging you, someone explain how we're suppose to maintain the illusion of prosperity while we continue to sink further and further into debt.

Or better still, how do we get out of debt while we continue to need to import energy and manufactured goods when all we seem to have to offer in return is war and fiat currency.

Minyan William:

Paul, you get to the head of the class!

Our fiat currency is so devalued that what everyone has deemed a bull market from 2003 forward has resulted in a loss of purchasing power from the resulting "profits" due to the devaluation of our fiat currency.

With bulls markets like that, who needs bear markets?
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