Chicago Boyz

                 
 
 
What Are Chicago Boyz Readers Reading?
 

 
  •   Enter your email to be notified of new posts:
    Loading
  •   Problem? Question?
  •   Contact Authors:

  • CB Twitter Feed
  • Blog Posts (RSS 2.0)
  • Blog Posts (Atom 0.3)
  • Incoming Links
  • Recent Comments

    • Loading...
  • Authors

  • Notable Discussions

  • Recent Posts

  • Blogroll

  • Categories

  • Archives

  • Scylla and Charybdis

    Posted by David Foster on July 26th, 2010 (All posts by )

    Deflation: John Mauldin

    Inflation: Ambrose Evans-Pritchard

    Both of these well-written articles make for sobering reading. See also my March 2010 post an architect of hyperinflation.

     

    3 Responses to “Scylla and Charybdis”

    1. Robert Schwartz Says:

      I wish I knew. I am sitting on a lot of cash right now, and there is no convincing story to drive investment. I saw today in the WSJ that zero coupon treasuries were the best investment in the last quarter. OTOH, given where rates are, almost all of the risk in long term treasuries is on the long side. They can’t go up very far, but there is almost no limit to the amount they can go down. Equities could be defensive if there is mild inflation, but if we go off the deep end, watch out. Even mild deflation will pain equity investors. Check out the Nikkei:

      http://en.wikipedia.org/wiki/Nikkei_225

      Now trading around quarter of its all time high which occurred 30 years ago.

    2. Jonathan Says:

      Cash is risky because of inflation. Short bonds have no yield. Long bonds are risky. Munis have tax advantages but low yield and increasing default risk. Real estate is risky because of deflation. Stocks may be a good short-term bet — at least you can get out if you need to. But deflation and long-term demographic trends work against stocks. A good long-term strategy might be to buy t-bond puts, rolling them as they expire. This strategy might work in part because it is psychologically brutal and few people will be able to stick with it. Some types of real estate investment may also make sense at current price levels.

      Disclaimer: I don’t know anything and the above is not advice.

    3. cjm Says:

      what held value in previous deflationary periods? [just asking rhetorically, i don’t know either]

      wouldn’t residential real estate provide income, and retain value, even if the prices drop? wouldn’t the relative value of such properties stay even with other goods and services?