3 arguments for inflation, and 3 tactics to cope

[nero3]

Re: 3 arguments for inflation, and 3 tactics to cope

I think you are right, but..The fed seems to have the market in it's hand now. In the sense that I think they can control the market IF they print enough money. However. I am not sure that political will exist to print the money needed, yet. That's why I think it might get pretty rocky ahead. Another round down, is certainly possible. The deflationary forces are so strong, that to overcome them, will cause inflation to totally overshoot. And if they don't, then we know Japan. I am not sure Ben Bernanke and the FED is going to embark on policies that will cause inflation to overshoot totally. I think it is likely they will try and have it the "lukewarm" way. But that won't work, that's the biggest worry. That they won't push to hard on the pedal. Some think it is irresponsible, but otherwise the whole economy would self destruct, if they do to little, and hover along like Japan, if they go for the lukewarm solution.

I certainly think they were discussing the benefits of inflation, and I hope they were frank enough to explain to Obama that while he think he is doing a lot, it is nowhere near what he needs to do. http://www.calculatedriskblog.com/20...se-dinner.html


Had the fed instead of 300 billion, decided to buy 2 trillions of government bonds, and another 4 trillion of agency debt, totaling around 6 trillion (to resemble the WW2 economy), they would get in the ballpark of where they need to go.

[Guest]

Re: 3 arguments for inflation, and 3 tactics to cope

Nero3 - there is absolutely nothing wrong with taking aggressively sized profits here. Any nasty corrections coming up out of this past November - March low can rob you of a lot of profits. I think we are right on the cusp of a big across the board correction. But IMO the bull market when averaging out over the next three years is going to be on track. So you will have the headache and uncertainty if selling now, to figure the re-deployment points up ahead. Probably it is indeed now not a bad sell. For the next year I think it can continue to look and act very much like a trader's market (so it may be harmonious to act accordingly and trade it) - but over the next 3-5 years I think we've got a colossal bull which will become evident further out. Easy for this claim to "sound" wrong today.

I think you are right, but..The fed seems to have the market in it's hand now. In the sense that I think they can control the market IF they print enough money. However. I am not sure that political will exist to print the money needed, yet. That's why I think it might get pretty rocky ahead. Another round down, is certainly possible. The deflationary forces are so strong, that to overcome them, will cause inflation to totally overshoot. And if they don't, then we know Japan.

I certainly think they were discussing the benefits of inflation. http://www.calculatedriskblog.com/20...se-dinner.html

[nero3]

Re: 3 arguments for inflation, and 3 tactics to cope

Nero3 - there is absolutely nothing wrong with taking aggressively sized profits here. Any nasty corrections coming up out of this past November - March low can rob you of a lot of profits. I think we are right on the cusp of a big across the board correction. But IMO the bull market when averaging out over the next three years is going to be on track. So you will have the headache and uncertainty if selling now, to figure the re-deployment points up ahead. Probably it is indeed now not a bad sell. For the next year I think it can continue to look and act very much like a trader's market (so it may be harmonious to act accordingly and trade it) - but over the next 3-5 years I think we've got a colossal bull which will become evident further out. Easy for this claim to "sound" wrong today.

I have been selling some stocks lately. The rally really over-extended when my portfolio went from around + 30 to + 50 in a matter of days, I think it peaked at around the end of last week.
Russell Napier is waiting for treasuries to crash, and that this will take the S &P 500 to around 400 I think around 2014. If that is what is going to happen it will certainly be preceded by a blow off in gold. However a crashing treasury market will benefit a lot of stocks, even as the economy is bad as was the case in the seventies. He seems to think there will be a 2 year rally as the fed prints.

[surfersdsb]

Re: 3 arguments for inflation, and 3 tactics to cope

I'd be buying a major chunk of gold a gun or two and have a couple doses of tamiflu on hand.

[unlucky]

Re: 3 arguments for inflation, and 3 tactics to cope

I'd be buying a major chunk of gold a gun or two and have a couple doses of tamiflu on hand.

The official iTulip doomer kit?

Gold, guns, ammo, whiskey, tamiflu.

I think someone also mentioned diesel fuel, but I don't know if we got consensus on that one.

[BadJuju]

Re: 3 arguments for inflation, and 3 tactics to cope

Result: Rising PPI by Q3 2009 and rising CPI by Q4 2009 but no later than Q1 2010.

Is this calendar or fiscal?

[jtabeb]

Re: 3 arguments for inflation, and 3 tactics to cope

So, eventually, your borrowing will not be justified. Unless, of course, your trades happen in the black market (physical PMs, anybody ;)).

IF you're selling, I'm buyin'

[Guest]

Re: 3 arguments for inflation, and 3 tactics to cope

Jtabeb - Regardless of my near term bearishness on the PM's for the next 18-24 months, I'm thinking it's with very high probability, firecrackers time around about in 2011-2012 for $2,200 gold and $45.00 silver. Not too long to wait for the impatient, and almost no time to wait at all, for the patient ones.

[metalman]

Re: 3 arguments for inflation, and 3 tactics to cope

Jtabeb - Regardless of my near term bearishness on the PM's for the next 18-24 months, I'm thinking it's with very high probability, firecrackers time around about in 2011-2012 for $2,200 gold and $45.00 silver. Not too long to wait for the impatient, and almost no time to wait at all, for the patient ones.

that settles it. i'm buying more pms tomorrow.

[TRake]

Re: 3 arguments for inflation, and 3 tactics to cope

Jtabeb - Regardless of my near term bearishness on the PM's for the next 18-24 months, I'm thinking it's with very high probability, firecrackers time around about in 2011-2012 for $2,200 gold and $45.00 silver. Not too long to wait for the impatient, and almost no time to wait at all, for the patient ones.

Luke,

I don't think we go from $1000 gold to $2200 gold quickly. I think there will be an initial shock (bonds are no longer a safe haven). Commodities will go up quickly that day or that week being the only safe haven left. Then it will be slow and steady maybe for the next 10 years. Supply shock is almost already upon us.

When people no longer run to the government bonds and stocks are still not performing then there is only one place left to go. IMO Gold is not the only place, I think commodities in general will do well. I hold food in high regard and that leads me to DBA, due to the basic needs theory.


On another topic, I think that TIPS are a very bad idea simply because they involve the government. I think that TIPS are the last resort for the government to borrow money before people give up on bonds completely. TIPS may rise a bit in price, but TIPS have moved down since August of 2008 with no distribution, or dividend payment. I think there has been overall or general inflation since october of 2008. I know, I know, there has been disinflation since the oil bubble, but at the same time the dollar has been getting weaker vs world currencies.


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I don't like the measurement of inflation by CPI and I think it under estimates true inflation. I think that the government misrepresents true inflation and has been doing so for decades. Because of this I think that having your money in TIPS will slowly erode your capital on a real basis without you even knowing it. I think that Gold could outperform all other commodities if the price today is artificial and still being held down by central banksters. This may be their practice today, but there will come a time when they lose control of the price of gold.

The morale of this story is: Never trust the government! Not with your money, not with your life, not with anything!

Note: My opinion may be biased because of my service in the US military. I saw first hand how little they value human life. I am glad that the corruption is finally being revealed, but it will be painful mainly for the middle class and below of which I am a part.

[occdude]

Re: 3 arguments for inflation, and 3 tactics to cope

What about buying LEAPS for commodity ETFs? Gives you some serious leverage without borrowing and with limited risk.

Also, talking about risk in general, don't forget about increased regulation. Rationing, price controls and excessive taxation can kill the profits you get from income-generating assets. I am sure, e.g. energy/oil companies will be taxed to death and sued for every new development. Even when/if you get a sizable income/gain, something like enhanced AMT will come about to make sure "the rich" pay their "fair share". So, eventually, your borrowing will not be justified. Unless, of course, your trades happen in the black market (physical PMs, anybody ;)).

Very good point. Taxes are going to go up. If your investment returns JUST reflect inflationary factors, then you are going to end up NEGATIVE after taxes.

I agree with holding precious metals, also with having at least a 6mos supply of staples and larger holdings for things that store well and for long periods.

You may try energy investments in countries that have a dampned political will to punish the energy companies, places like Canada.

Right now the return on your investment is not as important as the return of your investment, so personally Iam heavy gold and short term FDIC insured cash (no more cash than what ever I have in fixed debt). So if they get crazy with the presses I'll pay them back with devalued money and gold will be golden, if deflation wins, then gold will still have some value and I'll look like genius in cash.

[charliebrown]

Re: 3 arguments for inflation, and 3 tactics to cope

Can the fed reel in the money supply? There is so much crap on their books who is going to buy it? Don't they have 700B of MBS, then there are those programs to swap treasuries for crap assets. Aren't they buying student loans, credit card debt etc?

The fed is now the buyer of last resort. They may have paid par for this junk, and will have to settle for 50c on the dollar if they try and sell it.

[santafe2]

Re: 3 arguments for inflation, and 3 tactics to cope

the solution to [credit] pollution is [credit] dilution.

strategies:

1. borrow fixed rate money now. rates are low and future inflation will eventually reduce or erase the burden of the loan.
2. use most of the borrowed money and other funds to buy precious metals and commodities.
3. consider buying income producing assets- real estate, energy producers, farmland..

timing- borrow now. you may want to wait on the purchases, or you may want to scale into purchases a bit at a time.

I agree with this jk and it is a core strategy for me. Others have pointed out the obvious, that one should not lever up beyond an ability to make payments for some period of time but the cost of borrowing money today at an after tax fixed rate is about 1%. The chance that this spread will widen, is quite low. The chance that this spread will reverse position is quite good. It's the type of investment ratios I like.

For example, borrow 70-80% on your current real estate holdings, invest that money in a secure depository account and roll it over every year as inflation moves up. It will not be that many years before interest pays your mortgage and produces income.

[nero3]

Re: 3 arguments for inflation, and 3 tactics to cope

Can the fed reel in the money supply? There is so much crap on their books who is going to buy it? Don't they have 700B of MBS, then there are those programs to swap treasuries for crap assets. Aren't they buying student loans, credit card debt etc?

The fed is now the buyer of last resort. They may have paid par for this junk, and will have to settle for 50c on the dollar if they try and sell it.

I think they can back the money, not in real terms, but in nominal terms, but that will take years. I doubt they will sell these assets at a nominal loss.

[jpatter666]

Re: 3 arguments for inflation, and 3 tactics to cope

I know Fleckenstein doesn't like TIPS because they control the metrics by which the rate is adjusted and why would that ever be favorable to you?