Joe,
Thanks for your reply and the Worth link. The article quotes Jeff Applegate as saying that the 1930s was the only 10 year period when bond returns were better than stocks, due to the 2% annual deflation during that time. Well, actually, I recall reading a couple of years ago, that if you bought 30 year bonds in 1982 and held them until about 1992 (years are approximate--I may have them slightly wrong), you would have done better on a total return basis than investing in the S&P 500. An amazing thing, I thought, since those were pretty good years for stocks, especially the S&P (an understatement, since I can't produce my tone of voice here).
I don't really have a grasp of this issue yet. Disinflation is obviously good; deflation, though, is another story. Japan has been fighting it for about 8 years now, and have interest rates at what, about 1% or so, without a rebounding economy? A little scary. We--especially politicians and the Fed--are usually fighting the "last war", in this case inflation, rather than looking at the next one, in good part because the last war is so much easier to see, and the next one is not only fuzzy, but widespread disagreement exists (understandably) about it. But if anyone has any further thoughts, I would be interested in hearing them, especially how it relates to investments in businesses like UTEK and the industries it supplies (semis, disk drives).
Sam |
