Let us create a 3d Digital eBook for you! DigyCat.com
The American Age of Inflation is Over
"The American Age of Inflation is finished." So says economist Robert Samuelson in his December 2nd Washington Post column.
This type of refrain is common. We often hear that this or that is ended - that such things only happen in the past, and that our new, more advanced time is above such mundane things. It is reminiscent of the late '90's declarations of the end of value investing, and the meaninglessness of p/e ratios, and the (can you believe it?) end of bear markets. Such drivel is what houses of cards are built on.
It is, in fact, just such declarations that should alert us to the impending disaster that awaits. The easiest way to know when a trend or characteristic may be on the horizon is the cacophony of pundits extolling its end. When the columnists and advisors in the late '90's told us that it was a "new era", and that we needn't worry about overpriced stocks, that was precisely the time to worry.
Today, when we hear economists like Samuelson announcing the "end" of inflation, it is again time to worry. We already sensed the alignment of a variety of factors that could lead toward the re-emergence of inflation, but the fact that apologists for government policy (economists) see the need to talk it away only serves as confirmation that the time is at hand. Inflation is apparently not only on the way, it is probably at our doorstep. The massive spending spree and resulting dollar devaluation should lead us to that conclusion anyway. We've been expecting some level of inflation for some time. But, when we start hearing such defensive postures from those who don't want to hear the truth, well, its time to begin planning for it more seriously.
In Samuelson's defense, his article focuses mostly on the idea that markets have risen rapidly over the past 20 years (since Reagan reduced inflation in 1982) due to the benefit of lower inflation. He argues that we will no longer benefit from that improvement. But his error is in thinking that things will now be "flat", and that inflation was a one-time event that will not be revisited.
He displays a lack of political understanding. As long as politicians can benefit from printing and spending other people's money, we'll see more inflation.Of course, the fact that we anticipate inflation in the financial system does not mean that this will affect all goods equally. Certainly, our enhanced trade relations have caused prices of some imported goods to drop significantly. However, as the dollar drops in value, our ability to buy imports cheaply will also be reduced, and already, prices of imported goods are rising from their lows. Since these cheap imports have been masking inflation for some time, this eventuality will speed the negative impact. Oil prices are a prime example of this phenomenon. This kind of price increase is naturally uncomfortable, but is a natural result of the free-floating currency regime we follow, and it is actually part of a healthy mechanism for refocusing our efforts. It isn't the price increases that should surprise us, and they themselves are not the problem. This is simply the result of a dollar that is plummeting in value. We need to realize that it is not the producers of goods that are doing us harm, but the governments who run our currency into the ground. Eventually, we may expect to see prices rising on most goods, including both those produced locally, as well as imports.
The result is important for investors. Rising price levels will mean your savings are worth less, and your retirement accounts must grow just to hold their value. It has been many years since this nation has dealt with high inflation, and most of us have forgotten how to deal with it. Since Reagan, Volcker, and Greenspan worked to defeat the wild inflation of the Carter, Ford, and Nixon years, we haven't had to deal with this devastating bugaboo, but today we should plan for it.
In addition to damaging our savings, inflation can make our debts less bothersome. High inflation will push interest rates higher, however, so only borrowers with fixed rates will benefit. Others will probably experience rising interest rates on their credit cards and struggle to pay them off. Never before in U.S. history have so many carried so much credit card debt in a period of high inflation. One might expect higher default levels. Inflation will also boost home prices without increasing value, and uplift profit levels without growing real assets. The outcome will be higher taxes and tougher competition. In the end, it will be a worse time for bonds, and while stocks will be a better place to be, high-flying growth companies will often disappoint. It is a wonderful time to think like a value investor.
To send comments about this article or to learn more about Scott Pearson's Investment Management Services, visit http://www.valueview.net
Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor's Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.
Investing - Google News
This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news
How to Invest Your Money
Think carefully on how to invest your money because if you make wrong decisions it could cost you dearly. There are many ways in which to invest your money and as such seeking the advice of a professional would be a very wise move.
Choosing A Financial Advisor
With so many financial advisors trying to woo you with their qualifications and experience, how do find one you can trust your finances with? 'Trust' is the keyword here, as you will depend on him/her for your future financial security. A good financial advisor can help you determine which investments are best suited for you, based on your financial goals.
How to Analyze the Veracity of Investment Newsletters
When trying to analyze whether a promotional ad for an investment newsletter or a market timing investment trading system is worthy of investigation, the following questions should be asked:Does the strategy have a track record? Without this you are really allowing your emotions to be in play. All of us want to believe that if someone says something it must be true.
Holy Grail Investments
Every year I go to the Money Show inOrlando, Florida. Thousands attend.
You have rowed a boat at some time haven'tyou? Yes, put the oars in the water and pull. Ofcourse, you don't know where you are goingbecause you are sitting backwards.
Use of a Franchise Business as a Family Tax Planning Strategy
Suggesting the use of a franchise business as a vehicle for family estate and tax planning. Specifically using as an example, The Car Wash Guys, a portable car wash franchise, where you will be purchasing a completely designed and outfitted car wash truck and the right to develop a specific city or regional area with out of pocket start-up costs between $25-50,000.
Your Worst Enemy To Successful Investing - The Media
How do you make your investment decisions and where do you get your information? If you're like most of the people I know, you look to the experts.That's fine, however it's important to be aware that for every expert, there's an opinion and for every opinion there's an expert.
The Basics of Tax-Free UK Financial Spread Betting
Financial Spread Betting (or Trading) offers a tax free method of speculating on financial markets.Quite simply, if you think a particular index, share, commodity, currency or sector will rise, you place an UP bet.
Guru Focused: Robert Olstein's Short Sells
While it is rather rare that value gurus sell stocks short, Robert Olstein has been selling short in his Financial Alert Fund. The accountant-turned fund manager spots values by looking behind the numbers.
Using Divergences to Keep Out of Bad Trades
The American Football season just came to an end with my team getting close to the championship but falling short again. I am a big fan of the Indianapolis Colts and we keep having a groundhog day season year after year but it is still fun to watch.
Waiting 20 Years Can Cost You Millions - Dont Wait Start Today
Many Young people live for Today. They really don't fully understand the power of compound interest.
Stocks, Oil, and Bonds
A barrel of oil bounced to over $60 Thu, which triggered a steep sell-off in the stock market Thu and Fri, although oil pulled-back to around $59 a barrel, and closed at $59.84 a barrel Fri.
Retirement Plan Considerations Cheat Sheet for Small Business
RETIREMENT PLAN CONSIDERATIONS are something every small business person needs to be thinking about. Do you have a strategic plan? Don't expect to have social security save you.
Numismatics are for Collectors, Not Investors
As a precious metals investor, you may heard much about numismatic and "semi-numismatic" coins, particularly the St. Gaudens $20 double eagle gold coin.
The Perfect Mutual Fund
The Perfect Mutual Fund is the one you build yourself!The perfect Mutual Fund you build should have the objective of owning no more than 12 to 15 companies; owning shares in 12 companies would allow the diversity needed to sleep well at night and would provide a cash dividend every week of the year.The 12 companies (with staggered dividend payout dates) in yourperfect Mutual Fund should not only provide a cash dividend every week of the year, the companies should also have a historical record of raising their dividends every year for at least the past 8 years (to eliminate risk).
Seecrets on Investment: Tired of Making Huge Losses in the Stock Market - Part 1
Over 80% of all individual investors lose money in any given span of ten years. This figure is likely to be higher, given most people's reluctance to reveal their losses.
Beta Factors: How They Can Be Used In The Current Situation
Ever since the turn of the century, world stock markets have been very volatile. In other words there have been significant movements (up or down) in share prices.
Investing In or Owning Drug Lab Properties
Clean Up (includes the insides and the outside of a building)Air out the buildingRemoval of contaminated materials: Carpets, carpet pads, Linoleum, drapes and blinds, air-filters, refrigerators, range, water heater, all tenant clothing and their furniture.Removal needs to be to a site that accepts contaminated product.
Shareholders Meeting Changing With Times
A significant number of corporations that settled accounts in the past year are ready to hold their annual shareholders meetings.In this year's meetings, more than 300 companies plan as their main focus of attention defense measures against hostile takeover bids.
Porters Five Forces Analysis
If you've ever listened to Warren Buffett talk about investing, you've heard him mention the idea of a company's moat. The moat is a simple way of describing a company's competitive advantages.
MyIdeal Domain Is For Sale - $8,000 For Enquiries eMail Us
© www.MyIdeal.biz - 2012