Stagflation Strategy?

[Bubblesitter]

Over the last number of months I’ve been more become more convinced that we are gonna be entering a period of Stagflation, persistently high unemployment, relatively low GDP growth an higher inflation. In other words, a replay of the 70s

http://piggington.com/you_say_inflationi_say_deflation

It leads me to the question. What is the optimal investment strategy during stagflation?

Overall 70s stock market was pretty anemic during the seventies. Basic consumer staples did well, consumer discretionary not so. Commodity, Mining and minerals did well.

Gold reached an inflation adjusted $2400/oz in late 70s

Housing did relatively well in the 70s, if you could finance. Iinterest rates were much higher, with mortgage rates were in the double digits. Now is a bit different as we are still in the Bubble hangover period with large numbers of foreclosures, shadow inventory. Many of those ARM holders today who could not refinance during recent historic low interest rates will probably go into foreclosure as their ARMS payments tied to LIBOR soar. This puts further downward pressure on housing pricing. During the 70s people generally just hunkered down and stayed put, and try to keep gainfully employed.

Short term instruments best on the way up, but eventually locking in a longer term high CD rate as Stagflation peters out, that is if you can time the market. Not easy.

The one wild card is probably the sovereign debt problems that is a different from the 1970s.

Anyhow, some of my ramblings. What would you invest in if you’ believe we are entering Stagflation?

Bubblesitter

[an]

Housing and CD.

[an]

Housing and CD.

[an]

Housing and CD.

[an]

Housing and CD.

[an]

Housing and CD.

[scaredyclassic]

I experienced huge growth in the 70s starting the decade at about 4 ft tall and ending up around 5’10. It was pretty awesome.

[scaredyclassic]

I experienced huge growth in the 70s starting the decade at about 4 ft tall and ending up around 5’10. It was pretty awesome.

[scaredyclassic]

I experienced huge growth in the 70s starting the decade at about 4 ft tall and ending up around 5’10. It was pretty awesome.

[scaredyclassic]

I experienced huge growth in the 70s starting the decade at about 4 ft tall and ending up around 5’10. It was pretty awesome.

[scaredyclassic]

I experienced huge growth in the 70s starting the decade at about 4 ft tall and ending up around 5’10. It was pretty awesome.

[moneymaker]

I just realized this morning that investing is truly analagous to surfing. Everybody is out there hoping for the big one. Only if you are skilled, in the right place ,at the right time and know how to paddle(work it) then you can catch a pretty nice ride. Everybody else is just bobbing with the swell. My experience tells me that when 2 waves are too close together they tend to cannabalize each other, oh yeah by the way I just drank a landshark beer, So! Many a time I have caught that first big wave only to find out that there is a whole set of waves coming in behind it. Analogously if you invest too much money in opportunity A then you miss opportunity B,C and D. Now the trick is when do you start counting waves. Generally there will be a calm,or sucking sound(like right before the tsunami), I call it the trough. I think we had a trough in 2008, then stocks went up(wave#1), then gold went up(wave#2), now we are ready for wave #3, except as every surfer knows you still have to look out over the horizon to see if that big one is really coming. And if it is sometimes you have to paddle pretty hard to get out there and meet it before it crashes down on top of you. My guess is that wave #3 is wait… wait… yes… real estate. For an investor now is probably a good time to invest. Now I don’t have a clue about the location, perhaps not San Diego but my gut tells me interest rates aren’t going much lower.

[moneymaker]

I just realized this morning that investing is truly analagous to surfing. Everybody is out there hoping for the big one. Only if you are skilled, in the right place ,at the right time and know how to paddle(work it) then you can catch a pretty nice ride. Everybody else is just bobbing with the swell. My experience tells me that when 2 waves are too close together they tend to cannabalize each other, oh yeah by the way I just drank a landshark beer, So! Many a time I have caught that first big wave only to find out that there is a whole set of waves coming in behind it. Analogously if you invest too much money in opportunity A then you miss opportunity B,C and D. Now the trick is when do you start counting waves. Generally there will be a calm,or sucking sound(like right before the tsunami), I call it the trough. I think we had a trough in 2008, then stocks went up(wave#1), then gold went up(wave#2), now we are ready for wave #3, except as every surfer knows you still have to look out over the horizon to see if that big one is really coming. And if it is sometimes you have to paddle pretty hard to get out there and meet it before it crashes down on top of you. My guess is that wave #3 is wait… wait… yes… real estate. For an investor now is probably a good time to invest. Now I don’t have a clue about the location, perhaps not San Diego but my gut tells me interest rates aren’t going much lower.

[moneymaker]

I just realized this morning that investing is truly analagous to surfing. Everybody is out there hoping for the big one. Only if you are skilled, in the right place ,at the right time and know how to paddle(work it) then you can catch a pretty nice ride. Everybody else is just bobbing with the swell. My experience tells me that when 2 waves are too close together they tend to cannabalize each other, oh yeah by the way I just drank a landshark beer, So! Many a time I have caught that first big wave only to find out that there is a whole set of waves coming in behind it. Analogously if you invest too much money in opportunity A then you miss opportunity B,C and D. Now the trick is when do you start counting waves. Generally there will be a calm,or sucking sound(like right before the tsunami), I call it the trough. I think we had a trough in 2008, then stocks went up(wave#1), then gold went up(wave#2), now we are ready for wave #3, except as every surfer knows you still have to look out over the horizon to see if that big one is really coming. And if it is sometimes you have to paddle pretty hard to get out there and meet it before it crashes down on top of you. My guess is that wave #3 is wait… wait… yes… real estate. For an investor now is probably a good time to invest. Now I don’t have a clue about the location, perhaps not San Diego but my gut tells me interest rates aren’t going much lower.

[moneymaker]

I just realized this morning that investing is truly analagous to surfing. Everybody is out there hoping for the big one. Only if you are skilled, in the right place ,at the right time and know how to paddle(work it) then you can catch a pretty nice ride. Everybody else is just bobbing with the swell. My experience tells me that when 2 waves are too close together they tend to cannabalize each other, oh yeah by the way I just drank a landshark beer, So! Many a time I have caught that first big wave only to find out that there is a whole set of waves coming in behind it. Analogously if you invest too much money in opportunity A then you miss opportunity B,C and D. Now the trick is when do you start counting waves. Generally there will be a calm,or sucking sound(like right before the tsunami), I call it the trough. I think we had a trough in 2008, then stocks went up(wave#1), then gold went up(wave#2), now we are ready for wave #3, except as every surfer knows you still have to look out over the horizon to see if that big one is really coming. And if it is sometimes you have to paddle pretty hard to get out there and meet it before it crashes down on top of you. My guess is that wave #3 is wait… wait… yes… real estate. For an investor now is probably a good time to invest. Now I don’t have a clue about the location, perhaps not San Diego but my gut tells me interest rates aren’t going much lower.

[Author]

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