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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: Box-By-The-Riviera™ who wrote (3095)7/22/2003 11:58:30 AM
From: Perspective  Read Replies (2) of 4905
 
Yes, I believe in the stagflation outcome. And I think we might be set to learn a couple lessons I've been harping on for some time.

1. Price stability should be redefined such that all price movement is bad. There should be a PSI (Price Stability Index) used with the CPI that is computed on an RMS (root-mean-squared) basis, where all change - up or down - is considered bad. Kinda like shooting for the hole in golf - you miss either direction and it's bad.

2. The concepts of inflation and deflation vs. the K-wave are slightly misguided. Ask anyone making a living in a commodity-based sector is the last couple of decades have been inflationary. Life has become steadily more difficult for them. The "inflationary" phase of the K-wave is actually just the period where producers of discretionary and high capital intensity items gain pricing leverage at the expense of the producers of necessities (food, energy) and low capital intensity items. In our present "deflationary" phase, pricing power reverses to the commodities.

Absent the Fed's monkey business, it would produce generally rising or falling prices per the inflation/deflation monikers, but with an underlying tide of devaluing dollars, the effects are easier seen as shifts in pricing power.

BC
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