Hi KG4; Re: "one caller called in and said he was retiring in 3 years and NEEDED the money then and he was wondering if he should put it in the market, part in the market, stay conservative, or what.....the 'expert' told him something like "as we have been telling everybody in our newsletters, there is no chance of a bearish market and we recommend heavy exposure to equities at this time"....went on to tell the guy to put ALL his money into equities and he'll be a millionaire by 2007......I was jumping in my seat wishing I could have recorded that guy ..."
I think we're headed into an inflationary period that will make any small gains in equities lose money, relative to commodities. Sort of like the late 70s.
(a) We've got a hopeless and endless war that we're not paying for.
(b) We've got huge numbers of dollars overseas due to years of trade deficits.
(c) We've got a huge pile of government debt that will be much easier to pay back with inflated dollars.
(d) Under Clinton, the government reduced the amount of government debt that was in long term instruments (like 30 year bonds). This makes our interest payments more variable on short interest rate changes.
(e) Right now, our interest rates are as low as they get, from things get more expensive, both for the government and for any business that borrows money. That's inflationary.
(f) Bush's foreign policy has made the US into a bit of an international pariah. This will make it less likely that foreigners will want to hold dollars. When we start going down, everybody is going to stand in line kicking us.
Under these circumstances, I would suggest holding cash (i.e. bank accounts or 6-month T-bills), with some gold and gold stocks, or other primary producers like oil. It might be a good time to invest in US companies that still produce in the US, as a dropping dollar will help these companies.
-- Carl |
