Waiting Times

Wait – yes wait.
It’s not exciting, it’s not profitable as such.
But as the Tao advices; practice doing nothing, get more done by doing nothing.
Doing nothing is one of favorite investment strategies, often overlooked.
It has seldom been more true than now.
You should not be in the market without a clear idea of what you want to do.
If you see something short term clearly right now, you are a better man than us.
Better to stay in diversified currency cash right now.
Educate yourself in the meantime.

Newly printed fiat money and fiscal stimulus will eventually work.
Question is how.
Where will this money end up?

Also, what they are watching is inflation, as measured by the Consumer Price Index CPI.
But, the CPI is made up of a number of components, a basket.
Not everything in this basket will behave similarly. Our guess is that the price of grand pianos is falling right now, it is deflating. So whatever part of the CPI is made up of grand pianos is deflating. Other parts of the CPI will therefore need to inflate more in order to compensate for the deflationary elements.
Since we are now in a deflationary modus, this means some components of the CPI will be forced upwards. What parts? Our speculation is that domestic services is where it will come, it is where supply and demand is most easily manipulated and controlled by domestic governments. Internationally traded goods is much harder.
Governments can subsidize demand for health services, driving up the price of open market delivered services. This is how it is going to happen.
Since most peoples actual cost of living is rather removed from the CPI, many people will therefore not benefit from the current deflation. Their purchasing power will go down, even now – poor folks.
What does it matter that flat tv’s go down 20%, and you’re not going to buy one, when your physiotherapy hours go up 40%?

Bear markets experience bull rallies. Our question is if this November/December rally is the bull rally in the 2007/2008 bust. Or, if the entire 2003-2007 rally was a bull rally in the much larger 2000 bust?

Do nothing.

Gran Canaria Spain. December 22. 2008 Hans J Lysglimt

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