lance sjogren

Prepare Yourself for the Inflation Invasion

The $64000 question:

When the stock market makes its coming correction, you are going to have a massive amount of cash sloshing around looking for a home.

Whoever can figure out where it is going to go will be the next George Soros.

(for conservatives who are offended, I should point out that I think George Soros' politics stink to high heaven, but the fact is he is the best example of someone who made a killing by predicting markets.)

Prepare Yourself for the Inflation Invasion

Old trader: I agree, TIPS are risky because of the way the government manipulates inflation statistics.

And it is certainly in the interest of the govt to do so. If one believes as I do that the standard of living in the US (and probably many other developed nations) got unsustainably high and will have to go down, how do we get there from here?

One way is to devalue the dollar and see that people's incomes get inflated away to lower levels that may be sustainable into the future.

If we have 10% annual inflation but the official govt statistic is 5%, then the government can lower benefits in its programs like social security in a hidden manner that won't generate public outrage.

There will not be public outrage, because those affected will be like the frog in a pot of water that is being heated up too slowly to notice)

Private companies can give their employees cost of living raises in the 5% range, and they also will thus be administering inflation-adjusted pay cuts, but again the frogs won't notice.

Prepare Yourself for the Inflation Invasion

"Those who say there's no inflation must not buy groceries, pay ever-rising property taxes, or shop for shoes, or pharmacy products."


There has been a lot of price inflation in recent years, but I don't believe there has been for the last year or so.

Unfortunately, the brief lull in inflation won't last long. And the worst of it is, the new round of inflation may be of the stagflation variety- in other words, inflation in parallel with an economy that is shrinking.

Prepare Yourself for the Inflation Invasion

Inthemoney: I agree the stock market rise the last several months is probably largely due to monetary expansion.

In my view, stocks have become severely overvalued due to too much money sloshing around looking for a home.

What I wonder is when will that stop. Stocks represent companies that operate in the REAL economy (aside from fiancials, of course). The REAL economy sucks.

Stocks are way overvalued considering the horrendous state of the real economy.

But still, the money printing goes on, and all that new money has to go somewhere.

The smart investor is one that can figure out where people are going to shift all that money once they realize that stocks are overvalued and due for a major correction.

I wish I knew.

I think at some point it will be commodities, especially precious metals, but that may still be 2-3 years down the road.

Prepare Yourself for the Inflation Invasion

Sethbru, I agree that the money supply increase the Fed has been doing up to now is largely just to fill back up the black hole of collapsed debt, and thus will not create inflation.

However, the US is running a structural deficit of at least 1 trillion per year, and I believe that is not going to be reduced in coming years, the pressures to further INCREASE the deficit are far too powerful.

And, I sincerely doubt there is going to be a market for that annual 1+ trillion in Treasury Bonds that will be issued to fund that debt. So I believe the Fed is going to print new money to buy them up.

And that will be extremely inflationary.

Predicting the Next Great Bubble

Those predicting inflation point to the massive expansion of money and credit.

Those skeptical about inflation point to the fact that in assets like real estate, demand far outstrips supply and will for the forseeable future.

So who's right? Both, I believe. Money supply growth will fuel inflation in some assets. For other asset types, a glut of supply relative to demand will preclude price increases.

Precious metals will go way up, same with other commodities like oil and agricultural products. On the other hand, real estate is going nowhere for at least the next 3-5 years.

Jim Rogers: U.S. About to Have a Currency Crisis

I do believe massive inflation is on the horizon, but I don't believe there is any basis to know when it will kick in.

Also, we don't know what the Fed will do when inflation starts heating up.

Will they tighten the screws, even though that would cause interest rates to skyrocket and deal a deathblow to the housing market?

Or will the only politically palatable approach be to sit on the sidelines as inflation rages?

And also I strongly believe the inflation will be very uneven in where it shows up.

I can't see it causing real estate prices going up, although it might help them to stabilize in dollar value. (not adjusted for inflation)

Certainly, gold will go up. Predictions of $7000 per ounce are considered the rants of deranged crackpots. However, there have been so many outlandish things we have already witnessed in this economic downturn- who's to say a 10x rise in the exchange rate between the US dollar and gold might not also occur?

What's Good About the Metals' Bad News

rolexdaytona:


You may have a point about it being time to buy banks.


As we know, the major banks are insolvent. In other words, their liabilities far outweight their assets.


However, the US is embarked on an inflationary crusade to prop up the economy.


Thus, as inflation kicks in, the massive net debt of the banks will shrink, and the banks won't be as putrid piles of garbage as they are now.


However, I think they will still stink to high heaven. So I still don't feel banks are a good investment.