Replies to post #2556 on Mostly: Classical

[Canuck Dave]

Bit the bullet and got some more CBR this morning.

The kid's a comer. Had taken some partial profits on it last week, but it just keeps on chugging. Stocks don't need reasons to go up, and this one fits the bill.

[kirby49]

Tom:

I like Heinz' turn of phrase "current cyclical 'reflation' phase. Trouble is that too many when talking about inflation and deflation are talking about prices which are the results rather than the cause. Heinz obscures the issue when he talks about pricing power as well. This causes differences of opinion as shown the other day between Michael and JR. JR sees the prices of many necessities such as insurance, housing, and medical care as skyrocketing and Michael believes we are beginning(?) a K winter.

Of course I'll have to throw in another opinion.<G> Worse, mine is simply to sit on the fence believing both are occurring simultaneously. The only way that I know to count deflation is through defaults such as bankruptcies, whether individual, corporate or governmental. If anyone has another explanation without involving price I would like to hear it. We know that individual bankruptcies are increasing and in governmental we had Argentina so far, but the corporate ones like Enron and Worldcomm etc. have been attributed to fraud rather than good businesses succumbing to the business cycle. Since the deflationary forces are hard to spot and haven't accelerated obviously lately this would make it appear that we are in a kind of stagflation. Having started my working career in '69, I can tell you that the one ingredient that is missing from that era is increasing wages and that's an overwhelming factor to forget.

To make matters worse there is a lot of talk lately of something called disinflation. I'm not sure what this is and if anyone can tell me it might clarify things for me. As best I can determine it would be a decelerating of what Heinz calls reflation. I told Zolt a couple of years ago to watch the amount of money that the Fed was pumping into the system and he said that it seemed to be constant so why was it useful. Well he was right, but the reason to watch is to see when it will change and if it decreases then different forces will be at play which we will need to make investment decisions at that time.

So far I see no change in what Greensperm is trying to do and no large increase in bankruptcies affecting deflation, so on the fence I sit. I might add that I do expect Michael's view to predominate, but then there's that old saying "Don't fight the Fed." It's revolution we need to kick the moneychangers from power.