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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (1512)	4/4/1999 11:45:00 AM
From: Freedom Fighter	Respond to of 1722

Porc, >>No, and they're not likely to -- for very long....etc....<< The country functioned well for decades during periods of mild "price" deflation. Economic growth was rapid, productivity was high and living standards were rising. The occasional violent busts were related to the fractional reserve lending institutions being overextended and making poor loans. That some people did better than others is the nature of the capitalist system, just as it is today. It is credit deflation that is a problem. But, that is a systematic banking issue on which we disagree and ground we have covered before on numerous occasions. These political and macro issues are very interesting, but they have little to do with which companies I invest in so they are best left to others. I am looking for companies that will do well in any environment since I admit to being unable to forecast the macro environment over long periods (short either). Interesting though, is that my company valuations are looking at long term prospects. So macro issues are generally irrelevant to my decisions just as long as my companies will be able to cope with whatever is thrown at them. ex. Tootsie Roll (a former holding) survived 2 world wars, inflation, and the great depression. It has a very clean balance sheet, excess cash and generates tons of free cash flow. My guess is that no matter what they hit it with, TR will come out of it better than most. When it's available at a price that makes sense I'll buy it again regardless of what's happening in the economy at that time and regardless of what I don't know about the future. For me it's just that simple. I buy great companies when the price is right. It's a company specific judgment. Wayne

To: porcupine --''''> who wrote (1512)	4/4/1999 12:57:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Porc, Just one thought on deflation, repaying debts, collateral values etc... from "intuition". I believe that nominal interest rates would adjust to a deflationary environment. If productivity is so high that nominal wages are falling (even though real wages are still rising), my guess is that the system would produce negative nominal interest rates. So not only would you not be paying interest on the loan, the principal amount would be falling without you paying a thing. It would just be falling at a rate that is lower than the actual deflation rate and thus providing the lender with a positive real rate of return. The asset holders real wealth would also remain the same even though the nominal price of the asset would be falling too. (excluding normal depreciation) Cash balances might also be falling but would still be producing a positive real return. Wayne