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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Seaworthy Lyric who wrote (33291)	10/3/1998 11:03:00 AM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

Jerry, No way to deflate this gigantic head. Like Jethro Bodean, I sometimes get headaches when this gargantuan brain attacks a complex problem, like, what to order for lunch at Taco Bell. <G> My user's manual says that if I keep it on maximum inflation, wear will be above normal. Then, I'll just have to fall back on my good looks. <VBG> 1. The nowhere else to invest theme has always been folly. Yes, it works in the short term because 99% of investors don't have an innovative bone in their bodies. But, eventually, they see that there is a huge array of investments out there that are not the standard US stocks, bonds or money market funds. IMHO, the US bond flight to quality has been going on for quite some time and the move is very long in the tooth. I think the next thing folks will discover, as the dollar continues to weaken and our trade deficit balloons, is that T-Bonds and Notes, as opposed to T-Bills, are highly risky. I always laugh because, when they were 14%, there were few of us who were buyers. But get them under 5% and the world comes to their door. So, although I agree with your thesis, I think it has just about played itself out. 2. Commodities are the way to go, at least if you like buying cheap and then praying they don't get cheaper. Even better, buying commodity driven economies, such as Chile, South Africa and Australia, through discounted closed end funds, looks like a long term slam dunk. The simple fact is, inflation has been tremendous in the west. But it has been financial asset inflaition, not consumer price inflation (though looking at the price of butter yesterday made my head spin. I thought they were quoting the price in Pesos. <G>) So far, companies and individuals have been able to buy commodities cheap with inflated dollars, inflated stock prices or deflated bond prices. Few corporations have taken advantage of these cheap real assets and, instead, invested their windfall cash flow in repurchasing the already overpriced company stock. Now, commodities are set for a comeback, not necessarily because of their strength, but because of the weakness of financial assets. Gold and platinum have already recovered a bit, as has oil and copper. The odd thing is that residential and business real estate is inflated in price while huge tracts of land controlled by commodity companies are deflated. That relationship will not hold. MB