Trading negative interest rates

[Maverick74]

Do the standard economic models apply when every country is trying to debase their currencies and many developed countries have high levels of debt? Doesn't the current influence of central bankers on the financial market make this period different than all periods before?

Here is a great article that explains all the relationships in simple and precise terms.

http://news.goldseek.com/SpeculativeInvestor/1331820420.php

In answer to your question, don't think of Gold as one asset. As I mentioned before, gold priced in other currencies is actually performing quite well. Gold is really 50 to 100 different products based on 50 to 100 different base currencies, etc.

 

[Cswim63]

Do the standard economic models apply when every country is trying to debase their currencies and many developed countries have high levels of debt? Doesn't the current influence of central bankers on the financial market make this period different than all periods before?

Yes but we don't know what will come out of the sausage machine first. Right now we seem to have deflation overall, with a few isolated instances of country and sector inflation. Zimbabwe and real estate for example. Even in real estate you have Washington DC up and Detroit and many areas down. I drive through parts of the Midwest and there are many ghost towns. Is it inflationary or deflationary? I don't know. It will eventually blow up but before that more deflation I think. I've been on the wrong side of this trade for awhile. --Swimr

 

[Cswim63]

Yes but we don't know what will come out of the sausage machine first. Right now we seem to have deflation overall, with a few isolated instances of country and sector inflation. Zimbabwe and real estate for example. Even in real estate you have Washington DC up and Detroit and many areas down. I drive through parts of the Midwest and there are many ghost towns. Is it inflationary or deflationary? I don't know. It will eventually blow up but before that more deflation I think. I've been on the wrong side of this trade for awhile. --Swimr

It wouldn't surprise me to see more and more unemployment as Government devours everything in sight. There's plenty of things to do out there in flyover land,lots of cleaning and renewal. But I see very little.

 

[shooter]

.....One of the best ways to analyze your trade is to look at Japan and see what worked in that lost decade. The answer...real estate. Japanese poured all their money into real estate instead of the stock market and instead of the bank.

Maverick, I'm curious if you have any links to material on Japanese real estate during the lost decade (forgive me for not doing my own research). But from what I recall Japanese real estate (or maybe just commercial RE?) also suffered a deflationary spiral after the asset bubble popped (1989-1990)? Maybe you meant real estate outperformed relative to the Nikkei?

My own 'fear' is that the Dow and S&P could see a long slow decline as the baby boomers cash out 401ks and IRAs, and I've been curious as to what assets you would want to own in that environment....only thing obvious to me is healthcare/pharma which is where the baby boomers dollars would be going to.

 

[shooter]

For what it's worth, the lost decade stuff I've been skimming through point out deflationary land price trends along with the Nikkei's decline. Still, I'd like to know what exactly the Japanese were putting their money into during the lost decade (the folks who made money, anyway). JGB's? Select stocks/sectors of the Nikkei? Foreign assets?

 

[Cswim63]

For what it's worth, the lost decade stuff I've been skimming through point out deflationary land price trends along with the Nikkei's decline. Still, I'd like to know what exactly the Japanese were putting their money into during the lost decade (the folks who made money, anyway). JGB's? Select stocks/sectors of the Nikkei? Foreign assets?

I believe a lot of it came here and to Europe in the form of bonds

 

[Maverick74]

For what it's worth, the lost decade stuff I've been skimming through point out deflationary land price trends along with the Nikkei's decline. Still, I'd like to know what exactly the Japanese were putting their money into during the lost decade (the folks who made money, anyway). JGB's? Select stocks/sectors of the Nikkei? Foreign assets?

They bought real estate after the stock market popped but the Japanese gov't put a stranglehold on credit to kill that bubble shortly after the stock market popped in 1989. Some areas did still keep going up a little time after but yes, even real estate went down not because of deflation but the concerted effort on the gov't. However right now Japanese real estate caught another leg up while inflation is still sitting at zero. Japan's government is much more pro-active then ours when it comes to upside bubbles. That is not really a market function but a fiscal one. What were they doing with that money? Buying our debt.