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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: rubed who wrote (8586)	7/1/2004 3:30:05 PM
From: NOW	Respond to of 116555

Thanks for that post! He misses one thing: the kind of inflation they would need to induce is NOT the lesser of two evils as history CLEARLY shows. But what else do politicians and bankers do for heavens sake: history shows that time and again they opt for massive devaluation of the currency....

To: rubed who wrote (8586)	7/1/2004 3:33:26 PM
From: dpl	Read Replies (1) \| Respond to of 116555

What could happen is we get the worst of both worlds.Huge asset deflation and CPI inflation at the same time. Perhaps this.The RE bubble bursts and we get a very sharp/deflationary downturn probably the worst post WW II.Prices of assets and CP! drop sharply. After the recovery of this the Fed must print trillions.It feeds into the CPI but asset bubbles never reflate. The Fed also has a bigger problem than this.We need trillions for the baby bommers to retire.SS and Medicare are hugely underfunded and 80% of fixed pension plans are too.If we have a downturn this would grow.Most BB's have the rest of their money in two other assets Stocks and RE the very assets that will deflate. David

To: rubed who wrote (8586)	7/1/2004 4:15:21 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Cash held by S&P 500 companies, excluding financial firms, is now 10% of assets--double the level just five years ago and the highest it's been for at least 20 years. At the same time, capital expenditures are anemic. Some of this loot, of course, can go toward paying down debt. But net debt is already at less than 60% of shareholder equity--a 16-year low. Something like 40% of the S&P parket cap is financial stocks now so perhaps we are comparing apples to banannas or something like that. Debt is only 60% of equity now. Gee, what happens if stocks prices fall by 1/3 or 1/2. Finally, just what do they want companies to do with that cash? The smart ones will raise dividends. The stupid ones will try and buy out other companies at exhorbitant prices (just like 2000 I might add), or invest in more stores that are not needed. The crooked ones (and there wil be a lot of those) will issue a zillion stock options to themselves. Seriously what does anyone want them to do with it? Build more walmarts, McDonalds, Wendies, INTC make more chips, banks loan more money to Argentina, GM expand production? Perhaps they could pay their employees more. Nah. Employeees, who needs them? forbes.com M