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  • August 11, 2010 at 5:42 AM #17819
    Bubblesitter
    Participant

    You say inflation, I say deflation.

    You say potatoe, I say potato.

    Well, there’s alot more talk of deflation these days in the media. What are your folks thoughts for the next couple years? How are you investing?

    Here’s how I see things playing out in the next 5 year or so and how I’ve adjusted my portfolio. Please do NOT take this as any kind of financial advice. Although, I do have an MBA with finance concentration, I am no adviser, nor do I work in financial industry. I’m just a poor schmuck trying to save enough for retirement, put kids thru college in few years and fund life in general. Please consult your investment adviser. Ok done with fine print.

    Near-term 1-2 years, double dip recession, mild deflation. Unemployment will be persistently high. Government will be turning on printing presses to hold back more serious deflation. From a famous Ben Bernake quote from 2002, about fighting deflation, “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.” He will use it.

    Payback will be a b*tch though in a couple years, with record deficits continuing for years and deadlocked Congress unwilling to make the hard decisions, we will probably see inflation kicking in big time as ROW recovers and treasury yields will need to go up. Perhaps a bad replay of that 70s show, with double digit inflation.

    I’m still invested a good % in gold (via ETFs, gold mining, stocks), although less now than last year. Gold is still classic safe haven in times of serious economic turmoil, both inflationary and less so in deflationary times. It will take a hit during the deflationary period. I’ve protected my gold stock’s downside risk to 15% or so. Will jump back in when price takes bigger hit. I have shifted more to cash and some classic deflationary hedge such as stocks with good dividends and consumer staple stocks, along with higher quality debt instruments (shorter term <1-2 years).

    I’m having fun playing with excel spreadsheet and sensitivity models.

    What are you doing?

    Bubblesitter

    August 11, 2010 at 8:04 AM #589203
    GH
    Participant

    An issue I seldom see addressed is that everyone wants a high rate or return on investment, Stocks must go up 8% a year, houses must go up 8% a year, banks must give 5% and so on. At the same time we demand ZERO inflation, and the Fed obliges by turning the screws on inflation.

    The way I see it this has resulted in a massive pressure cooker economy with bubbles blowing left right and center. Now the whole thing is starting to look more like a soufflé though.

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?

    August 11, 2010 at 8:04 AM #589298
    GH
    Participant

    An issue I seldom see addressed is that everyone wants a high rate or return on investment, Stocks must go up 8% a year, houses must go up 8% a year, banks must give 5% and so on. At the same time we demand ZERO inflation, and the Fed obliges by turning the screws on inflation.

    The way I see it this has resulted in a massive pressure cooker economy with bubbles blowing left right and center. Now the whole thing is starting to look more like a soufflé though.

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?

    August 11, 2010 at 8:04 AM #589833
    GH
    Participant

    An issue I seldom see addressed is that everyone wants a high rate or return on investment, Stocks must go up 8% a year, houses must go up 8% a year, banks must give 5% and so on. At the same time we demand ZERO inflation, and the Fed obliges by turning the screws on inflation.

    The way I see it this has resulted in a massive pressure cooker economy with bubbles blowing left right and center. Now the whole thing is starting to look more like a soufflé though.

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?

    August 11, 2010 at 8:04 AM #589941
    GH
    Participant

    An issue I seldom see addressed is that everyone wants a high rate or return on investment, Stocks must go up 8% a year, houses must go up 8% a year, banks must give 5% and so on. At the same time we demand ZERO inflation, and the Fed obliges by turning the screws on inflation.

    The way I see it this has resulted in a massive pressure cooker economy with bubbles blowing left right and center. Now the whole thing is starting to look more like a soufflé though.

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?

    August 11, 2010 at 8:04 AM #590250
    GH
    Participant

    An issue I seldom see addressed is that everyone wants a high rate or return on investment, Stocks must go up 8% a year, houses must go up 8% a year, banks must give 5% and so on. At the same time we demand ZERO inflation, and the Fed obliges by turning the screws on inflation.

    The way I see it this has resulted in a massive pressure cooker economy with bubbles blowing left right and center. Now the whole thing is starting to look more like a soufflé though.

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?

    August 11, 2010 at 8:37 AM #589228
    briansd1
    Guest

    [quote=GH]

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?[/quote]

    Productivity and population growth.

    Problem is American workers are already as productive as can be right now.

    And there’s rising public sentiment against immigration.

    August 11, 2010 at 8:37 AM #589323
    briansd1
    Guest

    [quote=GH]

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?[/quote]

    Productivity and population growth.

    Problem is American workers are already as productive as can be right now.

    And there’s rising public sentiment against immigration.

    August 11, 2010 at 8:37 AM #589858
    briansd1
    Guest

    [quote=GH]

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?[/quote]

    Productivity and population growth.

    Problem is American workers are already as productive as can be right now.

    And there’s rising public sentiment against immigration.

    August 11, 2010 at 8:37 AM #589966
    briansd1
    Guest

    [quote=GH]

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?[/quote]

    Productivity and population growth.

    Problem is American workers are already as productive as can be right now.

    And there’s rising public sentiment against immigration.

    August 11, 2010 at 8:37 AM #590275
    briansd1
    Guest

    [quote=GH]

    My question to those wiser than I… How can you maintain huge investment growth and zero inflation?[/quote]

    Productivity and population growth.

    Problem is American workers are already as productive as can be right now.

    And there’s rising public sentiment against immigration.

    August 11, 2010 at 8:54 AM #589243
    Arraya
    Participant

    Brian you don’t understand how the economy works.

    If there is zero inflation(as defined by an increase in money supply), than there is little to zero investment growth and actually it becomes quite dysfunctional, if it is not growing, as we will see.

    As if, we just add some population the economy will magically grow. Good grief

    August 11, 2010 at 8:54 AM #589338
    Arraya
    Participant

    Brian you don’t understand how the economy works.

    If there is zero inflation(as defined by an increase in money supply), than there is little to zero investment growth and actually it becomes quite dysfunctional, if it is not growing, as we will see.

    As if, we just add some population the economy will magically grow. Good grief

    August 11, 2010 at 8:54 AM #589873
    Arraya
    Participant

    Brian you don’t understand how the economy works.

    If there is zero inflation(as defined by an increase in money supply), than there is little to zero investment growth and actually it becomes quite dysfunctional, if it is not growing, as we will see.

    As if, we just add some population the economy will magically grow. Good grief

    August 11, 2010 at 8:54 AM #589981
    Arraya
    Participant

    Brian you don’t understand how the economy works.

    If there is zero inflation(as defined by an increase in money supply), than there is little to zero investment growth and actually it becomes quite dysfunctional, if it is not growing, as we will see.

    As if, we just add some population the economy will magically grow. Good grief

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