OT inflation:
IMO, high likelyhood of near-zero inflation for years, due to:
1. widespread overcapacity in everything from cars to DRAMs (= zippo pricing power). Toyota is still building new auto plants in the U.S., Micron is still spending too much on capex, etc., etc.
2. the internet, globalization are dissolving all local monopolies and "toll-gating".
3. unemployment flat to mildly up (= flat to falling wages)
4. China continues to integrate into the global labor/capital/trade markets, which means a vast reservoir of low-cost products and low-wage workers holding down prices for goods and labor.
But, although I think interest rates will stay low, and maybe even go lower, I also see credit standards tightening. Providers of capital to some (but only some, so far) business sectors have realized that, for years, they've lent vast amounts of money that isn't going to get repaid, and their credit standards have been far too lax. In the next year or two, credit card lenders, mortgage lenders, providers of auto loans, etc., etc., are going to come to the same realization. I will not go back to 100% long the stock market, until this happens, and I'm willing to be patient. |
