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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: Sun Tzu who wrote (281179)	7/15/2014 11:03:33 PM
From: Bilow	Read Replies (3) \| Respond to of 281500

Hi Sun Tzu; Re: "Some inflation or a lot of inflation? ... On the other hand, if you think we will quickly bypass all other stages and move on to full inflation due to excessive liquidity, then dividend stocks will be of little help, you should just move with natural resources or their stocks." I don't see how we could have a lot of inflation without the traditional build up through a bunch of small inflation and then inflationary expectations. The Fed's problem right now seems to be that people are too afraid of risk. So money is going into bonds that should, by all rights, be going into stocks. Probably better than dividend paying stocks would be decent growth stocks but look at stuff like INTC and MSFT. They're paying decent dividends. I picked up the book "The Death of Money" and found it rather unconvincing. He's talking about how the dollar dies because of either deflation or inflation and denies that both of these can be avoided. I just don't see it. Right now the Fed is demonstrating that it can avoid deflation, helicopter ben and all that. And yet inflation just doesn't seem to be around the corner. And if inflation does start coming back, it should do so slowly. I have a suspicion that part of the problem is that so many boomers are putting their money into very risk averse funds in order to fund their retirement. And so they've driven down anything with any risk to it. But for a company to keep paying on its bonds its stock is very likely to do reasonably well and those bond coupons are not that much less risky than the stock dividends. I remember back in the late 1970s / early 1980s when you could buy GM at 3x earnings. Those kinds of valuations were very attractive; but they were post inflation. The current situation seems somewhat analogous to that and the situation of the mid 1930s when stocks were a great deal but the public was risk averse. Honestly, from what people have told me, I expected to see stocks wildly inflated but they're not. Earnings have exploded, undoubtedly due to Fed, but those are still earnings and even after the Fed stops completely, AT&T is still going to be supplying phone service, Ford is still going to be making cars and McDonalds is still going to be selling "food". -- Carl