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Non-Tech : Companies that BENEFIT from a recession -- Ignore unavailable to you. Want to Upgrade?

To: zebraspot who wrote (24)	3/15/2008 5:59:08 AM
From: Sid Turtlman	Read Replies (1) \| Respond to of 34

"...since you probably know more about this than me." Actually, nobody really knows anything about this. It is all guesswork, and I have no confidence in either direction on long term rates--that is why I have I have plenty of short term treasuries as well, along with gold and bets on some non-US companies. That said, the bullish scenario for US treasuries would include (besides the safety aspect that has been playing out recently) the idea that inflation is a lagging indicator. If we get a severe recession or depression in the US, what will happen to the economies of Europe and Asia? I think they will follow us down--maybe not as bad, but perhaps bad enough to cause a crash in industrial commodities prices, including oil. There is a lot of leverage supporting commodities too, and supplies from new sources that could hit the market just as demand sours. There was inflation in the US just prior to the 1930s and in Japan in the late 1980s--certainly inflation of financial assets (i.e., bubbles, such as we have been having in stocks, real estate, art, etc., in the last 20 years.) Only as the bubbles deflated did price deflation show up. The unwinding of leverage in the financial system going on now means an unwinding of credit, and without credit, what creates the demand that pushes prices up? A worldwide deflation and depression is a possible outcome of this unwinding, in which case long treasuries will do very well.

To: zebraspot who wrote (24)	3/15/2008 2:18:36 PM
From: Sid Turtlman	Read Replies (1) \| Respond to of 34

I'll add that a bearish bet on long term treasury bond prices is also, in effect, a bearish bet on the dollar. If TLT does drop as much as you think, it will probably be because the US economy sinks while that of the rest of the world stays strong, and the US dollar plummets versus other currencies. Under those circumstances, foreigners will dump their positions in US financial instruments of all kinds, and move back into their own currencies to buy presumably higher yielding bonds and better earning companies. Nothing wrong with having a bet against the dollar, but if you are already long foreign currencies and gold, don't think that a bet against the TLT will give you any diversification, rather it is an increase in the size of that bet. While I am bearish on the dollar versus gold, I am mainly bearish on all paper currencies versus gold. They have printing presses, gold doesn't. If foreign economies do follow the US down after a time lag, I can see the US dollar become strong versus the other paper currencies, even as gold continues to rise against all of them. I guess I can plausibly see long term US treasury rates going to either 1% or 8% in a few years, so don't want an unhedged bet on just one of those outcomes. But as long as economies get weaker and governments run those printing presses as fast as they can (taking over a collapsed bank and insuring all deposits, as the UK did with Northern Rock is the same thing in disguise), I have trouble seeing a plausible scenario where gold will go way down versus paper anytime soon. That's one bet I'm not hedging, at least yet.