This site has spent considerable time talking about what deflation is and its ultimate effect on prices. To reiterate, deflation is a monetary and psychological phenomenon. It is monetary since the financial authorities (central banks) have done everything in their power to combat deflation by entering markets and buying financial assets with money created out of thin air. This makes those financial assets command higher prices and accordingly, the interest rates on those assets falls. The theory is that this should stimulate spending by consumers, perk up the economy, and drive prices higher. This is where the psychological part enters. What happens if the extra money created out of thin air does not circulate like the authorities anticipated?
The following article, from a writer across the pond, discusses what happens to prices during deflationary periods
What can Yogi Berra tell us about the markets?
Yogi was known as the king of the maloprop. If you've ever heard words attributed to him you realize that though there is confusion at face value, the wisdom lies beneath. Markets can often be confusing and probably more so now than in history. What began as a series of articles in 2014 has culminated in the final commentary about the market run since 2009. Another significant bearish signal was given after September 30th. Read the following article to learn more.
A Wolf in Sheep's Clothing
Discussion of stock market cycles can get esoteric. It is important, though, to understand where a market sits relative to other historical periods, both bullish and bearish. In this article, we start with a teenager's opinion about holding stock paying no dividend and extend towards a macro discussion on secular bull and bear markets. We also mention how the recent contagion in Greece and Puerto Rico as well as the stock market meltdown in China can shed light in understanding these cycles.