Very briefly

[solarbird]

I'm heading out for things this morning, but I wanted to mention that I'm a complete idiot. The stock market play isn't fundamentals - as we all know, of course - and it's not even a sharp, quick recovery. The volume's too thin and it's behaving too oddly and insider sales are too overwhelmingly dominant and none of that makes any sense anyway. It's a hyperinflation/dollar devaluation play.

I'm really annoyed I didn't see this before now. I even mapped this out as a possible forward option two years ago! Man I can be slow sometimes.

Anyway, carry on, it hit me this morning and I just wanted it out there. If they're right... again, rationally, we're about hitting the limits of that play, at least for my upside targets based on this idea. But as always these things will overextend, and maybe a lot. If they're wrong, it's already a bubble and will explode messily. Good luck.

Comments

[unexpected-finn.livejournal.com]

Well, I happen to share your analysis, and have taken what I think is reasonable action in sheltering mobile assets within a hoped-stable reference currency.

Question for you, technically, is it reasonably possible that **all** freely-convertible currencies could experience an inflationary event simultaneously? My guess right now is that the USD and those other currencies which are semi-linked to it (whether by formal pegging, or by strong trade ties sensu NAFTA) could all end up in a hyperinflationary episode.

Stockpiling of natural resources, and attempts at actual corner plays in the case of certain mineral commodities (which we've discussed, offstage, already), would tend to point toward the latter scenario.

[mhaolain.livejournal.com]

I only vaguely comprehend what this means. Do you suggest that the stock market is reacting to the economic destruction and deficit spending combo package by jacking the dollar? Frontloading in the hopes the US has coasted clear, thereby ensuring they go through the windshield first? Stashing in bonds which are about to implode when the ship grinds past the iceburg?

Sorry to be so dense. I'm better informed, but not necessarily better educated by all that you've done over the last year or so.

[l33tminion]

Do either of you think it's worth moving some more hedge-against-calamity investments to gold at this point, or is that already overvalued?

[phillipalden.livejournal.com]

I would NOT say you are an "idiot." Your intelligent and well-written posts about this important topic are something I look forward to when reading my LJ.

[maellenkleth]

By this stage in the game, I would think that gold has already had the bulk of its run-up in value. Bear in mind that it has mainly speculative or symbolic value, anyway, out of proportion with its utility value. Caveat as usual is that I am not an investment advisor -- I just know how to get the stuff out of the ground.

[solarbird]

(All dollar references are in this case in the US, but nothing here is US specific.)

See, what I challenge is the necessity that hyperinflation (of price) be a result of dollar devaluation. Under sufficiently bad conditions, we can see dollar depreciation and theoretical price inflation for imported goods at the same time that we see substantial enough economic contraction (job losses, et al). In this scenario, buying power substantially drops, meaning that the theoretical price of goods under previous conditions becomes irrelevant, because if you have no buyers, you have no pricing power. Period, end of story.

A US dollar depreciation will cause a spike in unadjusted-dollars paid for oil. What does that do to the US economy? Where does that put it, and what does that do to liquidity?

I think there's an assumption out there that dollar devaluation always means hyperinflation and it ain't necessarily so.

[solarbird]

I don't know what you mean by "jacking the dollar."

If you are expecting actual hyperinflation, then you need to be in tangible assets and in equities because their actual values will in the long run remain constant (assuming they're well run and subject to the usual vagaries of any stock) while their label price will skyrocket. This protects your wealth - your actual capital - against inflation. So if you think that's what's coming, you should be in index funds - if the dollar loses 10x the value but the companies held in the economy as a whole remain reasonably stable, your stock will increase in value by 10 times, all else equal. Your actual net gain will be zero (and actually negative thanks to capital gains) but that's much better than taking the crushing blow of a 90% loss on cash.

Does that make sense?

[mojave-wolf.livejournal.com]

Well, it's not like anyone else (at least that I read) was posting this, either.

If you're in an idiot for getting it ahead of the rest of us,. what are we? :-P

[solarbird]

I don't understand the psychology of the "gold is money" people, and there aren't fundamentals at play here, so I have no idea. Seriously, none.