[MrBill]

MC2 wrote:
$this->bbcode_second_pass_quote('', 'I') think there's a problem with the idea that another bubble will be formed. What will it be made from? Housing was the last, what else is left to "bubble" up? Some have suggested oil and its related industry, others have suggested alternative energy, but I'm thinking the inflation is done. It's deflation now. It was hard to come to that conclusion, as I'd been in the camp that P.O. will force inflation willy nilly. But I don't see it that way anymore. P.O. will just add to the general level of despondency, suffer quite a bit of demand destruction, and fuels will be one of the more expensive things in every family's budget.

But I don't think we will see an inflationary bubble, much as they would like to be able to engineer one.

[MC2]

Bill, possible, but I don't think it's likely. Take a look at what the U.S. Fed is having to do to defend the latest rate cuts. The EFF is all over the place. Slosh is down into the 'teens. The problem is that banks are not originating credit at any price. We are in a deflationary contraction.

Edit: let me add, they WILL cut, but it will do no good.

[emersonbiggins]

The dollar went up sharply today, about 1%, up to 76.2 or so, very close to erasing the downward effects of the 75+50 BP cuts. Any thoughts?

INO USD

[benzoil]

$this->bbcode_second_pass_quote('MC2', 'B')ill, possible, but I don't think it's likely. Take a look at what the U.S. Fed is having to do to defend the latest rate cuts. The EFF is all over the place. Slosh is down into the 'teens. The problem is that banks are not originating credit at any price. We are in a deflationary contraction.

Edit: let me add, they WILL cut, but it will do no good.

[MC2]

$this->bbcode_second_pass_quote('emersonbiggins', 'T')he dollar went up sharply today, about 1%, up to 76.2 or so, very close to erasing the downward effects of the 75+50 BP cuts. Any thoughts?

INO USD

[MrBill]

$this->bbcode_second_pass_quote('benzoil', '')$this->bbcode_second_pass_quote('MC2', 'B')ill, possible, but I don't think it's likely. Take a look at what the U.S. Fed is having to do to defend the latest rate cuts. The EFF is all over the place. Slosh is down into the 'teens. The problem is that banks are not originating credit at any price. We are in a deflationary contraction.

Edit: let me add, they WILL cut, but it will do no good.

[hiperhiper]

If all asset prices are at their historical maximum, how to protect yourself from inflation in the long run. And in the long run increasing prices of energy are going to create inflation. Do you think it has already started??

I mean how to protect yourself from inflation if all assets that you can buy to do this are already at their maximum.

[MrBill]

I really do not know? I have been struggling with that same question now for a little over a year. In the short run you have to stay liquid and wait for asset prices to correct downwards. Capital preservation. Then once they fall you have to selectively buy those assets - commodities, metals, energy, land - that you feel will give you the best protection against rising inflation and the debasing of money. Some here would recommend gold. I am not so sure?

In any case, the idea is to preserve wealth, not to get rich. For example, if stocks fall on average 50 percent - and yours only fall 25 percent - then relative to other investors your remaining capital is worth twice as much as theirs. That is a win.

So when I buy bunds I am not looking for yield, and I am not expecting them to protect me from inflation in the long run, but I am expecting them to protect me from a fall in the price of other financial assets. They are a safe haven.

Also, choosing your currency is very important. The euro has been a good place to park US dollars to protect against weakness there. But now with a slowing EU economy it looks like the euro will start to weaken as well. So now it may be time to move some of those euros over into Canadian dollars. The Loonie is not immune to problems in the USA - as three quarters of their exports go south - but Canada has by far better economic and budget fundamentals. It should hold up better in value than the US dollar in a financial crisis. Plus Canada has those physical commodities that are likely to benefit from inflation and or a recovery for the global economy.


I plan to use some spare money to play currencies until those stock fundamentals start to look more attractive again. But I may be kidding myself though as the real returns of the stock market over the past twenty years or so have really fooled us into thinking that double digit returns are normal and sustainable.



We may enter a decade or longer period of stagnating real returns not unlike having invested in the Nikkei over the past twenty odd years once their real estate bubble burst. The Nikkei is only around 13.000 now versus a high above 34.000 in 1989. Like gold, a simple buy and hold strategy since the late 80s was not a money-spinner or even a hedge against inflation. It was a wealth destroyer.

And that is the real lesson. There is no one asset that can guarantee positive results in all conditions. They all depend on the price or the entry level. So if all assets are too expensive right now, then it means by default that cash is undervalued.


Please do not construe my ramblings as investment advice. Caveat emptor. Cheers.

[manu]

$this->bbcode_second_pass_quote('MrBill', 'I') really do not know? I have been struggling with that same question now for a little over a year. In the short run you have to stay liquid and wait for asset prices to correct downwards. Capital preservation. Then once they fall you have to selectively buy those assets - commodities, metals, energy, land - that you feel will give you the best protection against rising inflation and the debasing of money. Some here would recommend gold. I am not so sure?

In any case, the idea is to preserve wealth, not to get rich. For example, if stocks fall on average 50 percent - and yours only fall 25 percent - then relative to other investors your remaining capital is worth twice as much as theirs. That is a win.

So when I buy bunds I am not looking for yield, and I am not expecting them to protect me from inflation in the long run, but I am expecting them to protect me from a fall in the price of other financial assets. They are a safe haven.

Also, choosing your currency is very important. The euro has been a good place to park US dollars to protect against weakness there. But now with a slowing EU economy it looks like the euro will start to weaken as well. So now it may be time to move some of those euros over into Canadian dollars. The Loonie is not immune to problems in the USA - as three quarters of their exports go south - but Canada has by far better economic and budget fundamentals. It should hold up better in value than the US dollar in a financial crisis. Plus Canada has those physical commodities that are likely to benefit from inflation and or a recovery for the global economy.


I plan to use some spare money to play currencies until those stock fundamentals start to look more attractive again. But I may be kidding myself though as the real returns of the stock market over the past twenty years or so have really fooled us into thinking that double digit returns are normal and sustainable.

We may enter a decade or longer period of stagnating real returns not unlike having invested in the Nikkei over the past twenty odd years once their real estate bubble burst. The Nikkei is only around 13.000 now versus a high above 34.000 in 1989. Like gold, a simple buy and hold strategy since the late 80s was not a money-spinner or even a hedge against inflation. It was a wealth destroyer.

And that is the real lesson. There is no one asset that can guarantee positive results in all conditions. They all depend on the price or the entry level. So if all assets are too expensive right now, then it means by default that cash is undervalued.


Please do not construe my ramblings as investment advice. Caveat emptor. Cheers.

[hiperhiper]

$this->bbcode_second_pass_quote('MrBill', 'I')
And that is the real lesson. There is no one asset that can guarantee positive results in all conditions. They all depend on the price or the entry level. So if all assets are too expensive right now, then it means by default that cash is undervalued.


Please do not construe my ramblings as investment advice. Caveat emptor. Cheers.

[MrBill]

manu wrote:
$this->bbcode_second_pass_quote('', 'W')ow, Mr. Bill, or should I call you Trader Bill, what happened to all your optimism? Sounds like you have joined the Doomers. Get back to Canada before you get stuck in Cyprus with a bunch of pissed off Turks wandering around burning things. Yes, buy the Canadian Maple Leaf.