Re: Super-Bear

["Gary Santos" <evs@xxxxxxxxxxx>]

> I believe the challenge today is maintaining the same purchasing power of
your investment money compared to one year ago, two years...<
>Regardless of what you may believe, if our economy is in a deflationary
scenario, then holding cash will produce more purchasing power and wealth.
An increasing inflationary economy may or may not produce more wealth,
depending on how you measure it. From a stock market viewpoint, equities are
experiencing deflation or loss of wealth. Since 1982, investments in
long-term bonds has created a high degree of wealth. How long will it last?
And when the social mood is one of pessimism, it is very difficult to
concentrate on one's investment strategy, which may present a lost
opportunity.<
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If you want an answer to your question, look towards what is happening on
the monetary front. The bond market gave those returns because dollar
creation found a haven in bonds and the Fed encouraged such a flow by their
past and present policy. The danger is of course the reversal of this policy
and the tendency of investors to go into paralysis when price action goes
against their portfolio positions. To hold in cash in a deflationary
environment is equally dangerous as your barometers such as the CPI
are faulty.

I would think the issue of fiat, the power of the Fed over money and
interest rates, the fiscal deficits and the exchange rate are the issues
that you should concentrate on. If you turn do so, the answers you get will
depend on which economic philosophy your friendly economist swears to. It is
a complex and confusing web of theory and reality. Sometimes distinguishing
theory and reality is, by itself, a challenge. You may even want to try
technical/chart analysis but, as you have seen, opinions there also diverge
and it is the "lucky coin tosser" that gets it right. I, for one, have put
my bet in real estate (my market is depressed not like the US real estate
price level) and in gold shares bought at a PE of 5. In the final analysis,
it will be the financial and asset markets that will determine the course of
events. Just hope you are on the right side of the coin.