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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 368.31+0.6%Nov 7 4:00 PM EST
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To: TobagoJack who wrote (22049)9/7/2007 3:19:44 AM
From: elmatador  Read Replies (2) of 217620
 
"We may get price increases without asset price increases" You guys are simply saying: The cost of living goes up without a concomitant increase on asset prices.

That's a distorted way to look to the economy because it points to someone living off capital. So your capital has to keep increasing in price to keep up with cost of living inflation.

Keep in mind the prices, where there are more competition and absence of government intervention, increase a decrease based on market forces. While your stock of capital is subject to a different set of market forces. Thus the delta.

What the triggers 'price increases without asset price increases'? That's what we need to discover.

I understand clear as the day outside what is a price increase:

Example 1) and 2) happening right now in Brazil:

1) Income raises=>people go from cheaper fresh milk to costlier UHT milk =>the industrial capacity of producing that type for a moment, doesn't keep up with the demand, and prices increases.

2) Obviously concomitantly fresh milk demand goes down=The industries react by increasing production of UHT milk and price goes back.

“price increases without asset price increases” points simply to an economy imbalance. Then we need to find that imbalance. Because the market comes to solve and return to balance.

A price increase could be: Steel price going up because the demand in China is higher, wheat, coffee going up etc.

Now if your stock of capital you live off is your investments in the energy segment. That segment not necessarily moves in tandem with the components that triggers cost of living increases.

Or say the capital you live off are office space rented. That stock of capital is subject to a totally different set of circumstances than those that affects the components of your cost of living. For instance in a down turn, like the one that just starting, the returns will be lower.

If you live off homes rented and suddenly that market tanks, the capital you are living off produces less return.
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