The US economy glides like a box of rocks. Don't stand under it - Eric Janszen

[LargoWinch]

Re: The US economy glides like a box of rocks. Don't stand under it - Eric Janszen

The time for investing in commodities is when this economic meltdown bottoms, and there are strong signs of world growth. That's not now, and I don't see any signs of it on the horizon . . . just the opposite. So, investing in commodities now is a dead investment, with maybe some meager dividends.

raja, I believe it is a mistake to think that because of a slowing economy or a deep recession that commodities cannot go up in price. Are not the 70s a good example of this?

In my book, the world's CBs have an open policy of printing and real negative rates, this is bullish for commodities and precious metals regardless of the economic situation.

[LargoWinch]

Re: The US economy glides like a box of rocks. Don't stand under it - Eric Janszen

Yes, when and if hyperinflation hits, real estate will be a better investment than many other things.

I am not in agreement with this comment. Owners of crispy Federal Reserve notes around the world (and I understand there are quite a few), may want to spend it on a global asset with recognized value at home such as crude oil or gold.

What is an investor from China, Japan or the Middle East to do with a house in Missouri (no offense for people there - just the first state that comes to mind)?

[raja]

Re: The US economy glides like a box of rocks. Don't stand under it - Eric Janszen

raja, I believe it is a mistake to think that because of a slowing economy or a deep recession that commodities cannot go up in price. Are not the 70s a good example of this?

In my book, the world's CBs have an open policy of printing and real negative rates, this is bullish for commodities and precious metals regardless of the economic situation.

I'm a little over my head here, so correct me where I'm wrong . . . .

In attempting to evaluate your assertion, I found this from http://www.newworldeconomics.com/arc...07/010907.htm:

"the 1973-74 recession was caused by monetary inflation". And, "in 1973-74, of course commodity prices soared as the dollar's value collapsed. The dollar fell from $35/oz. in 1970 to $200/oz. in 1974, a sixfold decline in value. Indeed, the recession was blamed on this explosion in commodity prices, especially the price of crude oil!"

So it seems like the recession in 1973 is very different than the one we have now, which is caused by a debt deflation, so I believe the 1973 experience may not be applicable . . . .

We have a situation of opposing forces, which makes it very hard to determine the outcome. Taken in isolation, commodities will go up in inflation, and it seems we're due a truckload of that. On the other hand, if unemployment results in people having little money to spend, that will reduce demand for commodities, thus reducing prices.

Because of these two counter-balancing forces, and the difficulty in judging how they will play out, I'm reluctant to invest in commodities at this time.

[ThePythonicCow]

Re: The US economy glides like a box of rocks. Don't stand under it - Eric Janszen

I am not in agreement with this comment.

Yeah - you're right. I overstated matters. I probably should have said that real estate will be better than some things, not that it would be better than many things.

The key, in any case, is to stay healthy and to stay light afoot financially. The fittest and the fleetest will survive the best .

[raja]

Re: The US economy glides like a box of rocks. Don't stand under it - Eric Janszen

Yeah - you're right. I overstated matters. I probably should have said that real estate will be better than some things, not that it would be better than many things.

The key, in any case, is to stay healthy and to stay light afoot financially. The fittest and the fleetest will survive the best .

In hyperinflation, the following investments will be wiped out:
Bonds
Treasuries
Mortgages (for the grantor)
Currencies: Dollars, Yen, Euros, Swiss Francs, etc.
Money Market Funds

Gold will do well, if capital controls, excessive taxation or other government mischief doesn't spoil it.

During the German hyperinflation, those who held real estate throughout managed to save the capital thus invested . . . but the government froze rents.
Stocks quickly shrunk drastically in value, but those who bought a well-diversified list of stocks in solid, well-established companies quite early in the inflation and who held on throughout the period and also through the stabilization crisis saved much or all of their capital.

So, no PCow, you were not wrong . . . real estate IS better than many investments in a hyperinflation.