Re: Super-Bear

["Gary Santos" <evs@xxxxxxxxxxx>]

> Help me understand your comment about cash.  If I hold dollar bills in a
deflationalry environment, won't those dollars become more valuable as
prices decrease?<
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That the value of cash increases in purchasing power as prices drop is a
given. And, I spoke of a "danger" in the context of his desire to hold cash
to maintain the same purchasing power for his savings. Fine. Sell the stock
market at the top and buy at the bottom. Meanwhile, hold cash store in a CD
earning 1.25%. Or, if you think it will take longer, buy bonds to earn a
higher rate. But, is really all that easy to time the market? Is the turn
from deflation to inflation really marked by a dark line drawn somewhere
where it is plain to see?

I think the reality is that each asset market will have a bottom separate
from each other, even as deflation in other markets continue. An inability
to concentrate and thereby lose opportunities is a lesson that "traders"
look upon as a tuition fee to trade and is part of the danger I spoke of.
The asset markets of countries affected by the Asian Crisis which seem, so
far, to be a foreshadowing of the US asset markets may be used as an
example. First the stock market tanked, followed by the real estate market
then failures in corporate papers and bonds occurred. Deflation rippled
through the economy so to speak as it seems to be rippling through country
by country according to the international food chain.

So what does one do if one wants to preserve one's purchasing power in
today's environment?

Unfortunately, I have no definitive answer. But, I have made my bet and it
is not in cash because I distrust fiat  especially with what is happening
today. To be sure, cash is certainly fine if coming from a US environment. I
am not sure, of course, but I think the ripples still have to reach further
into the US pool. Cash was certainly the way to go back in 2000 but where
was deflation then?

But, then again, there is this fiscal package in the offing. Some in PKT
think that a good dose of deficit spending will result in capital spending
down the road. Certainly Bush thinks so or would want the markets to believe
so. With Greenspan and Bernanke behind him, he might be right. So, are we to
hold cash?

But, then again, there is this war. . .