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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: Fiscally Conservative who wrote (15036)	2/3/2009 1:34:44 PM
From: jim_p	5 Recommendations Read Replies (2) \| Respond to of 50416

You are probably right, but your timing is probably way off. The housing bubble and the credit bubble are both very deflationary. Consumer debt needs to decrease by over $6 trillion just to bring it back to the mean. The only problem is when a credit bubble burst debt levels always fall far below the mean and we have at least 6 more years of deleverage to get back to normal levels. Now on top of two of the largest deflationary bubbles in history, we now have the consumer going from a zero saving rate to most likely a 10%+ savings rate over the next few years. The dramatic shift from consumption to savings is also very deflationary. We don’t have any wage inflation to drive prices higher. The only possible driving force for higher inflation is the USD falling for a number of potential reasons. Since a number of countries will need to finance their stimulus spending beside the US, the biggest question is will there be enough savings to finance all of the deficits around the world? Oil will be a good play because the current price is below the cost to replace new reserves and because we didn’t build up a large surplus in the last up cycle. Nothing would make me happier than to see oil collapse into the 20’s because it wouldn’t stay there very long and it would be a great opportunity to go long with a very large percentage of the portfolio with very little risk.