re: "Inflation has been on the increase"
Yes, it has, in the last 2 years. Inflation bottomed in 1998, and has been up for 2 years now. The question is, will the future be:
1. the last 2 years is just a little blip up, and the trend of low inflation since 1982 is still intact, with yearly inflation in the 1.5-4% range, or
2. the 1982-1998 pattern is broken, and inflation will go up to the 7-13% range it was in from 1973-1981?
Yearly inflation since 1914: economagic.com
If it's choice 2, then the secular bull market is over, and I need to liquidate my stock portfolio, and buy gold. Only shorts and traders make money in stocks in that environment.
But I don't think that's going to happen. My current guess is scenario 1: we get a recession in 2001, worse than the one in 1980, not as bad as the one in 1973-4. Consumers will consume less, unemployment will nudge up somewhat, pay raises for most people will not happen. Employees are going to give up the dream of working for 5 years for a go-go tech company, and then retiring a millionaire. In that environment, inflation isn't going to take off. So, after the excesses are wrung out of the system, the secular bull market resumes, in 2002 or 2003 (and inflation stays in the 1.5-4% range).
But, if I see inflation getting above 4%, and the Fed tolerating it, or the Fed unable to control inflation for other reasons, then I'll begin to believe scenario 2.
JS@borderlineclown.com |
