Zeev's Turnips Patch-No Politics (ZEEV)

[Train Guy]

Deflation, Crash or ...
The Shepherd Investment Strategist 's Jim Shepherd

The current spectacle of publicly
traded company misdeeds could
eventually be eclipsed by those of
government as it continues to
release data and then finds it
necessary to issue corrections
later. The recent admission by the
Commerce Department that the
economy had actually contracted
during three quarters in 2001 and
not one quarter, as it had originally
claimed, is a prime example. It is not
the first time government data has had to be revised after
producing an economic picture that is less worrisome to the
public, nor is it the first time that I have found it necessary to
warn my readers about these discrepancies. However when
the truth is eventually revealed its consequences are often
more harmful to the investing public than if more accurate data
had been released on a timely basis.

There are many who may doubt this claim and there are many who believe that the government would never issue inaccurate or managed data. However, history is replete with examples of instances when government found it necessary to re-issue corrected data, especially during the 1930s.

In fact much of the data that I use is mirroring the deflation problems that were so prevalent during the Great Depression. And although the data that I use has not yet confirmed that we are entering into deflation, it is very, very close and I do not expect any improvement in the economic situation that could turn things around. If deflation were to happen it would be devastating to what's left of stocks and most other inflation hedge assets including gold and real estate investments.

Although I prefer to be in stocks where one can normally garner the best return, that has not been the case for sometime. I am presently monitoring two very serious situations that could unfold in the near future. One is the serious deflationary problem that is mounting and the other is the possibility of a total collapse of the remaining value of stocks. Whether these events are able to be deflected, and would be indicated in advance to us through a new buy signal or not, I will soon know.