Recession Risk: The Threat Of Rising Interest Rates [View article]
James
That argument lacks logic. You can't go from $45,000 to $5,000 and say that a 1.3% increase in the rate of inflation diminishes the purchasing power of the $45,000 to a point where the impact of super low interest rates is not as significant as it appears.
Inflation has a different impact on different people. Fuel prices for instance impact the young much more than the older retired person. They just don't drive as much.
Also, the elderly who have accumulated assets and now wish to live on the interest are not in the market buying consumer items to the degree younger people do.
At $5,000 a year a person can't even pay his utility bills - let alone real estate taxes on a home that is probably paid for or food. $45,000 and an inflation rate of 3.3% vs $5,000 at an inflation rate at 2% is a no brainer - give me the former.
This low interest policy was set in place to drive asset prices higher through inflation that would monetize debt across the spectrum if it had worked. It has failed in all categories except equities and that is clearly a bubble that is soon to burst.
ZIRP is just another tragedy in a long list of tragedies brought on by a political class that is willing to do anything to get votes no matter how irresponsible their actions are in the long term.
The unfortunate consequence is that the long term is no longer long term. The consequence of this vote driven, give them what they want mindset is at our doorstep.
It's a damned shame our fiscal and monetary policy leaders have been so incompetent. In the private sector such actions would lead to long prison terms.
Surviving And Prospering Over The Next 4 Years Of Economic Darkness [View article]
The collective ignorance of the American people is honestly heartbreaking. I don't think even those who understand another 4 years of Obama is going to be bad really understand just how bad it is going to be.
Whether Obama has a hidden agenda or is just not very smart and doesn't realize the economic consequence of his policy and perspective is still a mystery to me. My guess is the hidden agenda.
Don't expect Bernanke to come to the rescue either. He has accomplished his job. Just as Obama told the Russians - once I get elected I can do what I want.
Well, he is elected folks and he has 4 more years to complete his mission. The final phase of the Amercian transformation starts today .
Don't hesitate to hit the sell button. The exit doors are likely to get crowded before the day is over.
Why I Remain Bearish Despite The Cyclical Bull Rally [View article]
F&G
You are not alone in your view and I respect that. I don't agree with it but I respect it. Considering we are all time highs I would guess it won't be to much longer before one of us is proven right and one of us is proven wrong.
If there weren't differences of opinion there wouldn't be a market as it takes a buyer and a seller to make a market.
The Last Innings Of The Bull Market [View article]
John Maynard Keynes said that markets can act irrationally longer than some investors can remain solvent. Well, this is an example of just that - an irrational market. In 1973 I had a super trader that ran a few thousand dollars into $250,000 during the inflationary euphoria that prevailed at that time. Our head analyst came to me and advised that I tell my trader to take some postions off. He did and the market continued higher for a few more weeks. My trader was furious and we put the trades back on. A week later the market broke and locked limit for days. We finally got out after a week of punishment. He lost all the $250,000 and his initial investment and ended up $100,000 in deficit. The point is market tops are particlarly hard to call but when the break does come it is fast and furious. There is simply no fundamental support for these prices and the headwinds are severe.
A Grand Bargain: 8 Factors That Could Drive A Surprise On The Deficit [View article]
Moody's is now entering the fray on a credit downgrade and Standard and Poors promised a further downgrade as well absent progress toward reining in the debt.
To avoid these downgrades Congress and the President are required to do the impossible. The reason it's impossible is simple math - not political deadlock.
Our economy has been supported and recession held at bay soley as a function of massive injections of borrowed money back into the economy. As individuals and companies refused to borrow and spend our government has done so for us. Over the course of the last 4 years little has changed in that regrard.
Now we are faced with the big question - if the government stops spending will recession be the result. The answer is absolutely. The country has been on life support for 4 years with no appreciable improvement. If you pull the life support plug - fiscal stimulus - the patient will die figuratively speaking.
On the other hand, if we continue to borrow and spend and the patient remains stable but without significant improvement to the patient we are doing nothing but inching closer and closer to the inevitable conclusion - national bankruptcy.
The situation is not much different than a patient in a hospital on life support. How much money is the family willing to spend before pulling the plug. How much money can the family spend before they arrive at the point where bankrutpcy forces them to stop spending.
There is no win in this situation and a "Grand Bargain" is a fantasy. It's simple math and nothing else. It's an inconvenient truth that no solution exists here.
A Pending Market Crash Waiting For A Catalyst - The EU Delivers [View article]
mattm
Geez, enough of this herd mentality. Go some place else to spew this garbage. I listened all day to the giddy "we solved the problem" buy the dip bulls. Here is a good dip for you - just buy it.
Approaching The Fiscal Cliff As A Nash Equilibrium [View article]
Tom
You said: "I'm one of the 98%, and I believe that the US is a democracy and we can and should have what the majority of our citizens want"
In truth we are not a democracy and our founders warned us of the consequence of becoming a democracy. The consequence of a democaracy is that the majority rules and gets what they want. The certain end - at least according to our founders - is complete destruction of the "republic" as majority rule begins to take hold.
It is indeed a tragedy that almost no one in this day and age seems to recall this very basic distinction between a republic and a democracy. When asked what form of government the founders had constructed Ben Franklin replied: "a repuiblic if you can keep it."
The majority are not sufficiently informed to know what they want as they have no concept of the consequences nor should they. That is why we elect our leaders to do the right thing - not the politically expedient thing based on majority rule.
It is also a significant part of the reason we find ourselves in this situation today. Our political leaders are more concerned with being re-elected than leading us in a responsible manner by making hard decisions that we may not like.
Fiscal Cliff: Let's Call Their Bluff [View article]
Ellen
Your big government can take care of us agenda is based on what? Consider that it is government that created this mess with their fiscally irresponsible actions dating back for decades.
We can start with the Secondary Mortgage Enhancement Act that decided MBS’s would be equivalent to US Treasuries and acceptable investments for private sector banks. That was in 1984.
Then 8 years later – in 1992 - government passed the Housing and Community Development Act of 1992. That Act established that GSE’s (Fannie and Freddie) had affirmative obligation to facilitate the financing of low income housing.
These low income loans were bundled – MBS’s – and banks invested in them since our politicians deemed them equivalent to US Treasuries.
Then GSE’s were required to meet quotas on low income loans – first their total would be 30% and by 2007 that number was raised to 55%. Gradually, these MBS’s – by government mandate – were relegated to the level of junk bonds but remember, they were still equivalent to US Treasuries since our government said they were back in 1984.
Then we repealed Glass Steagall that allowed banks to speculate in high risk assets.
The result of these irresponsible moves brought us to the brink of a systemic collapse of the banking system and the after shock of these political blunders still plague us 5 years later.
All of this is the result of political expediency – a give the people what they want so they will vote for us agenda.
In the beginning we had a government that was formed – not as a democracy – but as a republic. The idea being that a democracy - based on majority rule - would result in the destruction of the country in time.
Our politicians are not, or should not, be elected to give us everything we want as we are not sufficiently informed collectively to know the consequence of a political class that tries to give us everything we want.
The fiscal cliff is very real and very serious and very much an unsolvable problem. It is the result of fiscal irresponsibility spanning decades. Any suggestion that it not serious or that more of the same is the solution is sheer insanity.
Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
A year ago I was convinced that the Fed's stimulus would work and that we were finally ready to break out of a 12 year trading range. The markets had pulled back and doomdays prophets were everywhere.
I argued that all this doomsday talk was nonsense. We had an agressive central bank and the government's stimulus would spark inflation. I am an avid supporter of Keynes and his theories and I really thought we were moving a lot higher.
Today I think we are range bound and we will move back to the lower end of the 12 year range. The Fed's policies have failed to remove fear and uncertainty. Deficit spending, huge debt, euro zone recession, contracting China, a failed monetary policy, US credit downgrade and the liquidity trap we are in are major headwinds. Add to that the price level we are at today and the risk/reward in equities just doesn't compute.
When you double down on a losing hand you simply compund a bad situation and that is what Bernanke did Thursday. If we do spark consumer confidence then all will be fine. If we don't then we have dug ourseleves a huge hole.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
PF
Please look at my calls on gold, the US dollar and Apple. And if you think I fit in the lazy category I want you to know I wrote 5 drafts of this before publishing and I have about 200 hours of research on the subject.
I did the research for my own benefit and elected to share my work with those who care to read it.
Sorry Bears, We're In A Secular Bull Market [View article]
Johnathan
The Fed has supported stock prices. Fiscal stimulus which is a lot more relevant than monetary stimulus has supported the economy since the recession.
If you move deficit spending back to normal longer terms levels we would be printing 7% to 8% negative on GDP. Do the math. The beneficiaries of this fiscal stimulus are the large, publically traded companies.
Virtually no metric that we use to measure economic health has responded to this massive stimulus. The Fed has backstopped sell offs in the stock market but the fiscal side has kept the profits in a positive upward trend.
The big question that we must answer is how long can we keep the market propped up by borrowing from ourselves which is what we are doing if we are amongst those who pay taxes.
We are an economy on life support and there is no historical data set that you can look at that is useful for predicting the future as we have no period in our history that is comparable.
"He suggested that lending standards are still too tight. This is a categorically false observation. Lending standards and defaults are inversely related"
Bernanke is even closer to the Krugman mindset that many have thought.
I read that about 20% of mortgages are still underwater and that 85% are being serviced timely. What happens to these numbers if we move into reecession? That 85% could fall dramatically.
I do wonder if you might be a little optimistic on the time frame here. You said we might be in the "very early stages . . . "
I can see a continuation of the deleverage that is much needed with even the slightest downturn in the economy.
The Recovery Continues To Topple 'Big-Picture' Theories [View article]
Sy
I particularly dislike the use of the phrase "doom and gloom". It is applied to all who voice a short term negative view. All those who forecast recession and market corrections - even steep ones are not "doom and gloom" fear mongers.
After all, recessions do occur as do market corrections and they occur frequently. It is the nature of the market and a good analyst should seek out dispartiy between stock valuations and the economic metrics that are the keys to those valuations.
You say "doom and gloom" events don't occur and I guess that depends on how you define the term. One thing I do know is that the nature of markets - especially ones manipulated by government monetary and fiscal policy to the extent we have had in the last several decades - do produce bubbles and those bubbles result in stock market crashes.
To disparage those who warn of another such crash makes no sense to me. We will have stock market crashes of various magnitudes in the future and we will have many of them. We always have and we always will. The empirical evidence of that is more compelling than your argument that the "doom and gloomers" are always wrong.
3 Key Metrics That Show Why We Can't Avoid Recession [View article]
Good Captain
The problem is a government bent on manipulating and orchestrating outcome through legislative actions. It started in the 80's when legislation defined mortgage backed securities as equivalent to US treasuries for bank investments.
It was compounded in the 90's when legislation mandated that GSE's ( Governmnet Supported Enterprises) enter the high risk, sub-prime mortgage market. The goal of Congress was to allow the low income sector to buy homes. The mandate initially called for 30% of all loans to be low income and in 2007 that mandate was increased to 55%.
The impact was that mortgage backed securities ended up being very high risk and not at all equivalent to US Treasuries. The credit crisis was the result. You all know the rest of the story.
We are still underwater on these mortgages - about 20% and representing close to $700 billion in under-collateralized mortgages. Is it any wonder banks are hesitant to loan.
The truth is the government brought us to this point and they have done little to resolve the crisis since the recession. Any suggestion that our government is working in our long term best interest would require some empirical proof of that for me to buy in.
Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
Seth
I think you miss the point. The assumption is that inflation is a foregone conclusion. It's not though.
In a stagnant or contracting economy the central bank attempts to spark inflation through stimulus. It is the desired result as it induces spending and borrowing resulting in a lot of temporary positives. Higher GDP, lower unemployment for instance.
If fear and uncertainty exist their efforts fail. This is a really big deal and people keep missing it. I have an inflation chart in my article High Unemployment - The New Economic Paradigm. Look at it or just pull one up off the web.
We have had around 12 succesive months of decline in inflation and we are getting precariously close to deflation. My point is that this new QE is not likely to change things much. We might get a temporary spike in inflation but without buy - in from the broader population and the banks it won't last. The previous QE's have failed to induce inflation for more than a few months and I don't see this one working either.
The idea that you have to put your money someplace is also flawed. Cash is an investment asset in that it moves inversely and in direct proportion relative to the asset you end up buying.
If a prolonged recession is the eventual outcome of all this then it is reasonable to assume that metals, stocks and real estate will fall in value measured as a broad asset classes. Staying in cash will allow one to buy a lot more of these assets in the future than they can today if this situation does develop. In other words your investment in cash gains in value.
It is usually true that you should invest but I am not so sure of that today. Look at the inflation chart and you might see my point.
Recession Risk: The Threat Of Rising Interest Rates [View article]
That argument lacks logic. You can't go from $45,000 to $5,000 and say that a 1.3% increase in the rate of inflation diminishes the purchasing power of the $45,000 to a point where the impact of super low interest rates is not as significant as it appears.
Inflation has a different impact on different people. Fuel prices for instance impact the young much more than the older retired person. They just don't drive as much.
Also, the elderly who have accumulated assets and now wish to live on the interest are not in the market buying consumer items to the degree younger people do.
At $5,000 a year a person can't even pay his utility bills - let alone real estate taxes on a home that is probably paid for or food. $45,000 and an inflation rate of 3.3% vs $5,000 at an inflation rate at 2% is a no brainer - give me the former.
This low interest policy was set in place to drive asset prices higher through inflation that would monetize debt across the spectrum if it had worked. It has failed in all categories except equities and that is clearly a bubble that is soon to burst.
ZIRP is just another tragedy in a long list of tragedies brought on by a political class that is willing to do anything to get votes no matter how irresponsible their actions are in the long term.
The unfortunate consequence is that the long term is no longer long term. The consequence of this vote driven, give them what they want mindset is at our doorstep.
It's a damned shame our fiscal and monetary policy leaders have been so incompetent. In the private sector such actions would lead to long prison terms.
JS
Surviving And Prospering Over The Next 4 Years Of Economic Darkness [View article]
Whether Obama has a hidden agenda or is just not very smart and doesn't realize the economic consequence of his policy and perspective is still a mystery to me. My guess is the hidden agenda.
Don't expect Bernanke to come to the rescue either. He has accomplished his job. Just as Obama told the Russians - once I get elected I can do what I want.
Well, he is elected folks and he has 4 more years to complete his mission. The final phase of the Amercian transformation starts today .
Don't hesitate to hit the sell button. The exit doors are likely to get crowded before the day is over.
Why I Remain Bearish Despite The Cyclical Bull Rally [View article]
You are not alone in your view and I respect that. I don't agree with it but I respect it. Considering we are all time highs I would guess it won't be to much longer before one of us is proven right and one of us is proven wrong.
If there weren't differences of opinion there wouldn't be a market as it takes a buyer and a seller to make a market.
JS
The Last Innings Of The Bull Market [View article]
In 1973 I had a super trader that ran a few thousand dollars into $250,000 during the inflationary euphoria that prevailed at that time. Our head analyst came to me and advised that I tell my trader to take some postions off. He did and the market continued higher for a few more weeks. My trader was furious and we put the trades back on. A week later the market broke and locked limit for days. We finally got out after a week of punishment. He lost all the $250,000 and his initial investment and ended up $100,000 in deficit. The point is market tops are particlarly hard to call but when the break does come it is fast and furious. There is simply no fundamental support for these prices and the headwinds are severe.
A Grand Bargain: 8 Factors That Could Drive A Surprise On The Deficit [View article]
To avoid these downgrades Congress and the President are required to do the impossible. The reason it's impossible is simple math - not political deadlock.
Our economy has been supported and recession held at bay soley as a function of massive injections of borrowed money back into the economy. As individuals and companies refused to borrow and spend our government has done so for us. Over the course of the last 4 years little has changed in that regrard.
Now we are faced with the big question - if the government stops spending will recession be the result. The answer is absolutely. The country has been on life support for 4 years with no appreciable improvement. If you pull the life support plug - fiscal stimulus - the patient will die figuratively speaking.
On the other hand, if we continue to borrow and spend and the patient remains stable but without significant improvement to the patient we are doing nothing but inching closer and closer to the inevitable conclusion - national bankruptcy.
The situation is not much different than a patient in a hospital on life support. How much money is the family willing to spend before pulling the plug. How much money can the family spend before they arrive at the point where bankrutpcy forces them to stop spending.
There is no win in this situation and a "Grand Bargain" is a fantasy. It's simple math and nothing else. It's an inconvenient truth that no solution exists here.
A Pending Market Crash Waiting For A Catalyst - The EU Delivers [View article]
Geez, enough of this herd mentality. Go some place else to spew this garbage. I listened all day to the giddy "we solved the problem" buy the dip bulls. Here is a good dip for you - just buy it.
JS
Approaching The Fiscal Cliff As A Nash Equilibrium [View article]
You said:
"I'm one of the 98%, and I believe that the US is a democracy and we can and should have what the majority of our citizens want"
In truth we are not a democracy and our founders warned us of the consequence of becoming a democracy. The consequence of a democaracy is that the majority rules and gets what they want. The certain end - at least according to our founders - is complete destruction of the "republic" as majority rule begins to take hold.
It is indeed a tragedy that almost no one in this day and age seems to recall this very basic distinction between a republic and a democracy. When asked what form of government the founders had constructed Ben Franklin replied: "a repuiblic if you can keep it."
The majority are not sufficiently informed to know what they want as they have no concept of the consequences nor should they. That is why we elect our leaders to do the right thing - not the politically expedient thing based on majority rule.
It is also a significant part of the reason we find ourselves in this situation today. Our political leaders are more concerned with being re-elected than leading us in a responsible manner by making hard decisions that we may not like.
JS
Fiscal Cliff: Let's Call Their Bluff [View article]
Your big government can take care of us agenda is based on what? Consider that it is government that created this mess with their fiscally irresponsible actions dating back for decades.
We can start with the Secondary Mortgage Enhancement Act that decided MBS’s would be equivalent to US Treasuries and acceptable investments for private sector banks. That was in 1984.
Then 8 years later – in 1992 - government passed the Housing and Community Development Act of 1992. That Act established that GSE’s (Fannie and Freddie) had affirmative obligation to facilitate the financing of low income housing.
These low income loans were bundled – MBS’s – and banks invested in them since our politicians deemed them equivalent to US Treasuries.
Then GSE’s were required to meet quotas on low income loans – first their total would be 30% and by 2007 that number was raised to 55%. Gradually, these MBS’s – by government mandate – were relegated to the level of junk bonds but remember, they were still equivalent to US Treasuries since our government said they were back in 1984.
Then we repealed Glass Steagall that allowed banks to speculate in high risk assets.
The result of these irresponsible moves brought us to the brink of a systemic collapse of the banking system and the after shock of these political blunders still plague us 5 years later.
All of this is the result of political expediency – a give the people what they want so they will vote for us agenda.
In the beginning we had a government that was formed – not as a democracy – but as a republic. The idea being that a democracy - based on majority rule - would result in the destruction of the country in time.
Our politicians are not, or should not, be elected to give us everything we want as we are not sufficiently informed collectively to know the consequence of a political class that tries to give us everything we want.
The fiscal cliff is very real and very serious and very much an unsolvable problem. It is the result of fiscal irresponsibility spanning decades. Any suggestion that it not serious or that more of the same is the solution is sheer insanity.
JS
Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
I argued that all this doomsday talk was nonsense. We had an agressive central bank and the government's stimulus would spark inflation. I am an avid supporter of Keynes and his theories and I really thought we were moving a lot higher.
Today I think we are range bound and we will move back to the lower end of the 12 year range. The Fed's policies have failed to remove fear and uncertainty. Deficit spending, huge debt, euro zone recession, contracting China, a failed monetary policy, US credit downgrade and the liquidity trap we are in are major headwinds. Add to that the price level we are at today and the risk/reward in equities just doesn't compute.
When you double down on a losing hand you simply compund a bad situation and that is what Bernanke did Thursday. If we do spark consumer confidence then all will be fine. If we don't then we have dug ourseleves a huge hole.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Please look at my calls on gold, the US dollar and Apple. And if you think I fit in the lazy category I want you to know I wrote 5 drafts of this before publishing and I have about 200 hours of research on the subject.
I did the research for my own benefit and elected to share my work with those who care to read it.
JS
Sorry Bears, We're In A Secular Bull Market [View article]
The Fed has supported stock prices. Fiscal stimulus which is a lot more relevant than monetary stimulus has supported the economy since the recession.
If you move deficit spending back to normal longer terms levels we would be printing 7% to 8% negative on GDP. Do the math. The beneficiaries of this fiscal stimulus are the large, publically traded companies.
Virtually no metric that we use to measure economic health has responded to this massive stimulus. The Fed has backstopped sell offs in the stock market but the fiscal side has kept the profits in a positive upward trend.
The big question that we must answer is how long can we keep the market propped up by borrowing from ourselves which is what we are doing if we are amongst those who pay taxes.
We are an economy on life support and there is no historical data set that you can look at that is useful for predicting the future as we have no period in our history that is comparable.
JS
Another Real Estate Bubble? [View article]
Excellent observations.
Your statement:
"He suggested that lending standards are still too tight. This is a categorically false observation. Lending standards and defaults are inversely related"
Bernanke is even closer to the Krugman mindset that many have thought.
I read that about 20% of mortgages are still underwater and that 85% are being serviced timely. What happens to these numbers if we move into reecession? That 85% could fall dramatically.
I do wonder if you might be a little optimistic on the time frame here. You said we might be in the "very early stages . . . "
I can see a continuation of the deleverage that is much needed with even the slightest downturn in the economy.
My compliments for your objectivity here.
JS
The Recovery Continues To Topple 'Big-Picture' Theories [View article]
I particularly dislike the use of the phrase "doom and gloom". It is applied to all who voice a short term negative view. All those who forecast recession and market corrections - even steep ones are not "doom and gloom" fear mongers.
After all, recessions do occur as do market corrections and they occur frequently. It is the nature of the market and a good analyst should seek out dispartiy between stock valuations and the economic metrics that are the keys to those valuations.
You say "doom and gloom" events don't occur and I guess that depends on how you define the term. One thing I do know is that the nature of markets - especially ones manipulated by government monetary and fiscal policy to the extent we have had in the last several decades - do produce bubbles and those bubbles result in stock market crashes.
To disparage those who warn of another such crash makes no sense to me. We will have stock market crashes of various magnitudes in the future and we will have many of them. We always have and we always will. The empirical evidence of that is more compelling than your argument that the "doom and gloomers" are always wrong.
JS
3 Key Metrics That Show Why We Can't Avoid Recession [View article]
The problem is a government bent on manipulating and orchestrating outcome through legislative actions. It started in the 80's when legislation defined mortgage backed securities as equivalent to US treasuries for bank investments.
It was compounded in the 90's when legislation mandated that GSE's ( Governmnet Supported Enterprises) enter the high risk, sub-prime mortgage market. The goal of Congress was to allow the low income sector to buy homes. The mandate initially called for 30% of all loans to be low income and in 2007 that mandate was increased to 55%.
The impact was that mortgage backed securities ended up being very high risk and not at all equivalent to US Treasuries. The credit crisis was the result. You all know the rest of the story.
We are still underwater on these mortgages - about 20% and representing close to $700 billion in under-collateralized mortgages. Is it any wonder banks are hesitant to loan.
You might want to read my blog on this. http://bit.ly/UjmDwZ
The truth is the government brought us to this point and they have done little to resolve the crisis since the recession. Any suggestion that our government is working in our long term best interest would require some empirical proof of that for me to buy in.
JS
Why QE3 Can't Work: Understanding The Liquidity Trap [View article]
I think you miss the point. The assumption is that inflation is a foregone conclusion. It's not though.
In a stagnant or contracting economy the central bank attempts to spark inflation through stimulus. It is the desired result as it induces spending and borrowing resulting in a lot of temporary positives. Higher GDP, lower unemployment for instance.
If fear and uncertainty exist their efforts fail. This is a really big deal and people keep missing it. I have an inflation chart in my article High Unemployment - The New Economic Paradigm. Look at it or just pull one up off the web.
We have had around 12 succesive months of decline in inflation and we are getting precariously close to deflation. My point is that this new QE is not likely to change things much. We might get a temporary spike in inflation but without buy - in from the broader population and the banks it won't last. The previous QE's have failed to induce inflation for more than a few months and I don't see this one working either.
The idea that you have to put your money someplace is also flawed. Cash is an investment asset in that it moves inversely and in direct proportion relative to the asset you end up buying.
If a prolonged recession is the eventual outcome of all this then it is reasonable to assume that metals, stocks and real estate will fall in value measured as a broad asset classes. Staying in cash will allow one to buy a lot more of these assets in the future than they can today if this situation does develop. In other words your investment in cash gains in value.
It is usually true that you should invest but I am not so sure of that today. Look at the inflation chart and you might see my point.