Deflation? (not inflation) Investment

Great discussion folks and pretty much spot on.

If we hit a deflationary situation, asset prices will fall across the board. We're seeing some of that now with real estate, some commodities, stocks off and on, etc.

Supposedly, in a deflationary situation, you would want to own long bonds and cash - apparently so that you can take advantage of cheaper prices.

However, things are never quite so simple. The Fed's been printing money 24/7/365 and injecting it into the economy via Quantitative Easing [read: dropping dollars from helicopters]. This would normally equate to serious inflation but as was pointed out, the money isn't circulating because the big banks don't want to lend money at these interest rates. They'd much rather keep it for themselves in the form of bonuses.

So the economy contiues to slow down, unemployment stays high (underemployment is about 20%), consumer demand for much of everything is poor and therefore the demand side of the price equation is soft enough to depress prices.

Will we see full blown deflation? Not unless the economy seriously worsens from here. Will we see inflation? I think so because I don't see where the Fed can withdraw the excess cash [read: exit strategy] without crashing the economy and if they don't, we're bound to sooner or later see inflation.

What to do? I'm just trying to cover my ass. I've got gold and silver both real bullion and speculative investments, I've got cash and cash in foreign currencies (loonies and 'roos), I've got short term bonds, inflation protected bonds and intermediate corporate bonds, int'l and emerging mkt bonds, int'l stocks, and not a lot of US stocks and am actually double short the U.S. long bond with TBT.

Will my strategy work? WTF do I know? I hope so and would rather times be prosperous and people had jobs.

peace,

rono

 

Log in or Sign up to hide this ad.

A good economy with good jobs and wages, and a stable financial system sounds great to me. In the meantime, I would very much like to know more about your foreign currency strategy. It is no longer very easy for Americans to open foreign bank accounts, as I have discovered recently. One could go to a bank, exchange some US dollars for Canadian dollars, and then shove it under a mattress, but that also presents problems. Could you elaborate a little more? Thanks .

 

Question: What is a "roos"? When you write loonies, I believe you mean Canadian paper money, correct? or do you mean coins?

I am hoarding my former green backs in the form of golden dollar coins. I feel little more secure with the thought of metal verses paper.

Did you go to a big city bank to get your foreign currency? I would have to travel almost 5 hours to get to a bank that might offer foreign currency.

Any thoughs on the topic would be appreciated.
(I suppose everyone thinks that debt of any kind is very bad).

 

I did some research on a related topic some time ago. I think the web site name was Everbank/www.everbank.com. I have not opened an account with them. Just FYI.

 

One problem with that approach is the internet. If it ever goes down, or becomes restricted, you may be stuck with an investment you can't redeem. I think keeping investments overseas is overrated anyway. Something isn't safer because it is several thousand miles away in a legal jurisdiction where none of us is completely familiar with the law.

 

Everbank is a US bank (FDIC insured) which offers foreign currency accounts.

 

Thank you guys. I remember researching Everbank at one point, and unfortunately I although I don't remember the details, I do remember I wasn't hundred percent comfortable with what I found after googling "EverBank lawsuits". It might be worth looking at it again.

It's not the jurisdiction I am so much interested in, as the ability to have currency in a regular savings account. I have had foreign bank accounts in years past, but they are not easy to open as they used to be.