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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (2937)	12/6/2003 1:22:11 PM
From: glenn_a	Read Replies (1) \| Respond to of 110194

Hi Fillmore. Interesting, but up while I have been very weighted in China, PM, and resource equities, I've also kept a good chunk of cash believing that we will inevitably encounter a serious bout of deflation. After listening to Donald Coxe's call, I'm beginning to rethink this position. I always figured we'd get a 1930's type scenario unfold ... sort of the Bob Prechter view. And, while I still think we'll have a terrible period of wealth destruction, it may indeed be more of the Argentina type model, where nearly all currencies are revalued against physical things. This has been Jim Puplava's (and others) premise for some time, but I always figured that Central Banks would be forced to raise interest rates, which would inevitably spark a serious spell of deflation. I'm beginning to lean, however, to a storyline that is more a stagflation period (more like "hyper-stagflation", certainly not benign), which sees the US$ lose its role as the world's reserve currency, whereby for a time wealth centers around the value of commodities, and currencies are priced in relation to their purchasing power of commodities. This is what we're presently seeing out of the middle east with regards to their repricing of oil. So really, my present asset allocation is pretty much exactly where I want to be I think. I would still want a good chunk (maybe 30% - CDN$ denominated) of liquid cash or cash equivalents to cushion against a rising interest rate shock. But I'm coming round to the view that the more important secular trend is the reorientation of the world's monetary system and pricing structure around commodities ... of which gold, and of course energy, WILL play a significant part. So I think what I am saying is that the primary destructor of wealth in the next couple of decades will be destruction in the present value of the dollar - i.e. the dollar's capacity to buy things in the real world. For people who's wealth is denominated in US dollars, that means inflation. I would think there will be currencies in time that will experience a deflationary impact, as THEIR currencies appreciate in value. But for a good period of time, gold and commodities may be forced to play an almost monetary type role. This isn't to say that I'll be buying stereo equipment with zinc or platinum, but commodities in general will exhibit the necessary condition of scarcity of supply which essential fulfills the condition of a stable currency. I hope I made sense here. I think my perspective is changing a bit here, and I'm not sure I'm being completely coherent. Thoughts? Comments? Regards, glenn