This has been my problem for a while now.
You and me both. Reaper seems to have called it right thus far, being long zero's. Perhaps Patron's call will hold better going forward? Given our lack of ability to truly read international sentiment changes, perhaps it's a roll of the dice.
Are we going to enter a debt deflationary environment or is the Central Banker going to be successful and keep inflation alive and transfer the wealth from savers to debtors.
We should remember that for a year or more, wealth/income transfers from savers/retirees to debt holders has eased the debt burden behind the scenes. Already...
The thing about this back door wealth transfer, is it is a slow process. If income drops quickly, lower rates won't provide enough debt burden relief to avoid a deflationary depression.
Assuming minimal international repercussions going forward, debt continues to be serviced (excluding the occasional worldcom/enron blowup) while holders of financial assets continue to recieve subpar returns. Time allows for debt relief through the backdoor to work. But we can't even begin to speculate on how current events may reshape international relations.
In my current view, the more debt deflation threatens, the stronger 'low real rate hidden wealth transfer' forces become, until something breaks. How does one win in that environment? Borrow money? Buy stuff? Land in SE Asia or New Zealand?
The more successful that forces already in place are in alleviating the strain, the more likely we see a back up in nominal rates and inflationary forces. How does one win in that environment? Short long term bonds? Keep duration short so as to rollover frequently into higher rates as nominal rates attempt to keep up with underreported inflation?
The prospect of an inflationary depression aren't pretty. One silver lining is the possiblity of increased tax reciepts as inflation works it's way on the system.
IMO, with the interest rates where they are now and what we are seeing in infation and the devaluation of the US dollar the Central Banker has been successful in the short term.
Yes, but the central banker appears now to be a bit player in the geopolitical snowball.
We as investors (savers) must make decisions where to put our capital so the results of the Fed's games do not allow our assets to be transferred.
Perhaps it is time to revisit that 'Got Skills?' query...
Smart people (ala Faber et al) already have suggested that it may be wise to relocate, to places such as New Zealand for a quiet, well earned, retirment, or SE Asia, if the goal is to provide a stimulating and flush with opportunity environment for young people.
We already know that in Argentina, about the only viable course of action was to extract oneself and one's family out of the country until the situation resolved itself. Yet 'family ties' and our desire to not engage in such drastic moves leaves us hoping that the powers which be can find a way to resolve the situation.
The sun shines, and I suggest we cross our fingers and hope we can muddle through all this. I don't think I survived the millenium bear market. <g> |
