The phenomenon of deflation, and how it relates to GRCU...
As many know, Japan's economy has been in a deflationary cycle for quite some time. Deflation is defined as a general decrease in the level of prices for goods and services over a period of time.
So an obvious question is how can this be a bad thing, if purchasing power continues to go up as prices continue to descend. Doesn't this create an excellent opportunity for those with money and the intent to buy. The short answer is yes and no. Because when prices have been deflating (declining) for some period of time, the logical expectation is that they will continue on that path for some time. And if that is the case, then postponing a purchase results in additional reward, since purchasing power continues to go up with time. The end result is a sort of buying paralysis, which creates a severe drag on economic activity.
A similar phenomenon is experienced in a stock that has been in a prolonged downward trend (deflationary period), such as GRCU. As long as the downtrend continues, those with an intent to own shares in the future experience a greater reward, the longer they postpone their share purchase.
And with a stock, this deflationary phenomenon is even more powerful than with consumable goods and services. Take, for example, a television. Even if the price has been declining for an extended period of time, and is expected to do so into the foreseeable future, postponing the purchase in anticipation of future price declines means not getting to use that television for viewing enjoyment while waiting.
But with a stock, where the only enjoyment has to do with eventually selling for a higher price than was paid when it was bought, the buyer can conceivable wait forever, while watching their buying power increase as the stock price continues to decline. For this reason, the catalyst needed for genuine buying to resume is a perception that the stock price will no longer get cheaper. An expectation that the price is now on an inflationary path (rising price) provides the motivation for accelerated buying.
Due to the protracted deflationary trend for GRCU over the past nine months (since it peaked back in April), there is obviously no real sense of urgency now for those interested in owning GRCU (for the potentially bright future) to rush into buying. But I believe that the only catalyst required for GRCU to return to a nicely up-trending chart, is for the downward share price trend to stabilize.
As always, simply my opinion.
GRCU
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