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Betting on Hard Times For The U.S.


Parsad
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“As long as deflation is out there, the inflation or hyperinflationary scenario just doesn’t play,” says Martin Braun, president of Adaly Investment Management Corp., a Toronto money manager.

 

I wonder if any of you are aware of situations where a country went from deflationary situation to a significant inflationary situation in a rapid period of time?

 

Peoples arguments for why there could be significant inflation make a lot of sense but I haven't seen a historical precedent for it.

 

SmallCap

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I am about half way through "The Big Short" and I keep wondering IF we aren't all the way through the debacle?

 

IMHO we've just started - we have a lot of issues to clean up before this is over. There is the ARMs next year, CRE, consumers and government need to delever, high unemployment (16% if you count underemployment), housing.....It seems that the market never really truly got that cheap inspite of all of it. The Fed keeps trying to reinflate the bubble, at some point it has to burst.

 

cheers

Zorro  :(

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There are indeed many alarming signs around us.  But the P/E's on some of our favorite quality large-caps are getting quite reasonable, and these are for company's generating large cash flows and/or incomes, and that none of us believe are going to disappear tomorrow.  From an investment point of view, I'm not sure that hard times for the U.S. necessarily imply a lack of current investment opportunities.  For stocks whose prices are the same as 10 years ago, where the underlying companies have incomes that are double that of 10 years ago, it seems there is value to be had ... despite alarming signs in the general environment, no?

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This is a time bet - Deflation now, Inflation later. Most folks would agree it is a very smart bet. But how long 'now' is ? is anybodys guess.

 

Demographics point to the US needing longterm external vs internal stimulus. US boomers are entering retirement & disinvestment, & much of their portfolios are in US securities.Who is going to buy those securities at higher prices?

 

The economics also point to coming cultural change; it does happen (60's race riots, black/female president, etc), but some parts of the US feel it more than others. Make illegals, legal & much of the demographics will resolve itself.

 

Apartheid systematically concentrated economic power in a small minority, & embedded the practice in the nations culture. If you were a beneficiary you just couldn't see how you benefited, same thing if you were a disenfranchisee - it was just 'how it is'. Mandela showed that apartheid is not sustainable.

 

Versions of apartheid still exist in the US. Privilidge based on skin colour in still a reality in the 'south', as is priviledge based on wealth (how you got the wealth being irrelevant). Most folks recognize that this has to change, & that is why there's so much disquiet.

 

SD 

 

 

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This is a time bet - Deflation now, Inflation later. Most folks would agree it is a very smart bet. But how long 'now' is ? is anybodys guess.

 

Demographics point to the US needing longterm external vs internal stimulus. US boomers are entering retirement & disinvestment, & much of their portfolios are in US securities.Who is going to buy those securities at higher prices?

 

The economics also point to coming cultural change; it does happen (60's race riots, black/female president, etc), but some parts of the US feel it more than others. Make illegals, legal & much of the demographics will resolve itself.

 

Apartheid systematically concentrated economic power in a small minority, & embedded the practice in the nations culture. If you were a beneficiary you just couldn't see how you benefited, same thing if you were a disenfranchisee - it was just 'how it is'. Mandela showed that apartheid is not sustainable.

 

Versions of apartheid still exist in the US. Privilidge based on skin colour in still a reality in the 'south', as is priviledge based on wealth (how you got the wealth being irrelevant). Most folks recognize that this has to change, & that is why there's so much disquiet.

 

SD   

 

 

 

We live in interesting times.  Take away the immigrants in the US and what have you got?  Stagnation.  Young adults avoiding procreation,  locked out of all the good jobs by the " educational" system until they have missed a quarter of their most productive years.  Geriatic pensioners living off the producers in the workforce.

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I see it differently.  There may be hard times but how has the US historically reacted?  We have re-invented/brought to market new ideas/products in a market that is the most competitive in the world.  In terms of culture, the US has been inclusive which makes the markets better and the superiority of one group versus another has been dis-proven the marketplace.  The marketplace has done more for equality than any gov't can hope to do by fiat because it creates equality based upon skill level and not any other characteristic.  The real question is do you want to allow freedom and the market to generate equality as the result or do you want to have equality by fiat by other autocratic (non-volentary means).  I think the former versus the later has been more successful historically.

 

I think equality will result from the system we have and most efforts to use autocratic means to achieve equality are either gamed or develop resentment for those not included in the special deals.  The use of autocracy to achieve equality has a terrible historical record of working.  In terms amnesty, I think there are 2 issues (the flow) and the folks here.  They both need to be addressed. 

 

Packer     

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I have read  several Econ books and heard several interviews. Some call for a V, some doom and gloom. The one that makes most sense to me is the New Normal by Pimco / The Range Bound Theory.

 

I think we will muddle through with long term unemployment at 9%. The market will be range bound until this shift is digested. The days of bubble driven growth are over and we will have a paradigm shift hopefully followed by some new technology. I think it will be 3-4 years. The Fed will fight off Deflation, and the world will eventually suffer a bout of inflation to make things easier to digest.

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I have read  several Econ books and heard several interviews. Some call for a V, some doom and gloom. The one that makes most sense to me is the New Normal by Pimco / The Range Bound Theory.

 

I think we will muddle through with long term unemployment at 9%. The market will be range bound until this shift is digested. The days of bubble driven growth are over and we will have a paradigm shift hopefully followed by some new technology. I think it will be 3-4 years. The Fed will fight off Deflation, and the world will eventually suffer a bout of deflation to make things easier to digest.

 

I don't disagree with you Myth, but I feel that the market went too far too fast, failing to realize that there are a lot of issues to muddle through and that it is going to take time. So while the economy may or may not collapse, I think the market itself will correct significantly when folks realize that it is going to take years to recover....

 

cheers

Zorro

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I think the markets will severely correct then move up again. Basically sheer greed, then fear.

 

By Range Bound I think we will be trapped between 8k and 12k for a number of years, while everything is digested / sorted out. When it was going up I was thinking things arent this good, though with Greece / EU issues I do think we have a bit to worry about, but dont think the world is falling apart.

 

I think its a value traders market, and nimble players can make alot of money. My heart does go out though to those entering the work force now, they are at a severe disadvantage vs those 4-8 years ago.

 

----

 

Auctually these are probably more hopes.

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I think the markets will severely correct then move up again. Basically sheer greed, then fear.

 

By Range Bound I think we will be trapped between 8k and 12k for a number of years, while everything is digested / sorted out. When it was going up I was thinking things arent this good, though with Greece / EU issues I do think we have a bit to worry about, but dont think the world is falling apart.

 

I think its a value traders market, and nimble players can make alot of money. My heart does go out though to those entering the work force now, they are at a severe disadvantage vs those 4-8 years ago.

 

----

 

Auctually these are probably more hopes.

 

Wilbur Ross thinks the economy (and presumably the market) will sputter than go up then go down again -- sort of what like you are suggesting, Myth. 

 

In such a market, I also tend to believe that value-oriented investors will fare the best.  But we'll see.

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