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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: David Howe who wrote (60296)	11/23/2002 10:36:11 AM
From: Perspective	Read Replies (4) \| Respond to of 209892

No, that's the problem with the coming inflation - it will be focused on imported goods. For years we've had rampant asset inflation - stocks and housing - but due to the dollar strength and falling interest rates, consumables have stayed flat or risen more slowly than wages, and rents haven't become impossible to handle. With the dollar falling, however, all that will change. The inflation is going to be focused in consumables, and particularly non-leveraged hard assets like commodities. The further down the processing chain you go (ie the more "value added") the less the inflation will show up. Corporations use their capital to add value to commodities. When there's a capital glut on and demand weakens, the value of that capital weakens substantially. Greenspan can do a 2:1 split on the dollar, but it's going to have the least effect where it's needed the most: on the corporate bottom line. So, the average Joe will see the price of everything basic rising and demand wage increases. US residents and corporations will be squeezed by input prices rising faster than finished goods. However, we've long since exported many of the jobs that support our daily consumption needs. What we produce here will remain under deflationary pressure. I see the real estate finance bubble ending and the quality of the average borrower getting into increasing trouble. And with the average person squeezed on the consumption end, I don't think real estate will participate in the coming phase of inflation at all. This will make it more likely to get upside-down on your home mortgage, and harder to sell if you need to move. Ownership of leveraged assets is going to be a dicey proposition the rest of the decade. Did think of something besides gold and Euro debt: short the retailers that have benefitted from the dollar strength. When our consumption of crap gets a higher price tag, they're boom will come under increasing pressure. Beneficiaries would be the heavy exporters as the dollar weakness makes their goods more appealing abroad, although I remain reluctant to own any equities during a secular bear market. BC