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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (29959)	2/3/2008 4:27:53 PM
From: Paul Senior	Respond to of 78749

Going into a stagflation and enduring it: For me, there'd be no hiding, no avoiding the pain of it. Based on my prior experience with the last one. Yes, I've got those oil service stocks and mining stocks. And yes, maybe the business will do okay, even show increasing profits. But these stocks like any in the market, will drop from current levels. (As people exit the stock market; as bonds become more attractive; as fud expands; as stagflation becomes more apparent and as it drags on and on) I've got some short-term floating-rate bonds. Those would help somebody who bought them within the stagflation. But buying them now, as interest rates come down as Fed eases, means a buyer now risks the bonds' values declining (i.e. taking a maybe temporary capital loss). With high interest rates, after Fed tightens, they might work (and perform better than stocks in a high interest environment.) Won't really help me though, since I am broadly diversified in stocks, and in a stagflation the p/e's will all come down (for those companies that still will have profits). Maybe the best alternative is to sell now and keep lots of money in short term debt instruments. They'll pay below inflation rate, so there's a small loss in purchasing power. Better that though for some people, than the risk they might take of large losses in holding fixed income or stocks. For now I am holding on and trying to hold and buy what look to be undervalued companies. (The risk being they even if they are undervalued, they'll get more so - and will stay there - in a stagflation environment.

To: E_K_S who wrote (29959)	2/4/2008 10:22:07 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78749

Stagflation - in Hagstroms book about W. E. Buffet there is quite a bit of space dedicated to how WEB playbook regarding stagflation. Buffet makes the point to purchase company that make goods that are inevitable (that people purchase anyways) and that have pricing power. in addition he prefers company that do not need a lot of Capex, the reason being that Capex intensive companies do see pressure on the input side. I am guess by this playbook, companies like KO, PG, NSRGY, MSFT, EBAY would fit the bill.