Friday, May 29, 2009

tunring the corner

A corner may have been turned, on the economy. I have been watching the bond markets, and have been predicting the economy will bottom this fall and begin recovery in a couple of years.

Well, I may have been off a little on the bottoming of the economy. The dry goods shipping index, probably the fastest reliable index of the world economy did a turnaround this month. We are still facing a long recessionary economy, with unemployment not turning around for at least a year, and housing prices not for at least another two years. (Take a look at the difference between the one year, two year, and five year bond interest rates.)

We can next expect a round of high (I won't call it hyper) inflation. More than 30%. Probably more than 60%. But spread out over a few years. I don't know if this will be 20% each year for 3 years or 12% each year for 5 years, but I think it will be somewhere around that three year scenario. So you now have permission to hoard (save) money. And you have permission to move to higher tax brackets, since your tax credits and deductions won't be worth as much. We get this compliments of our government (under both Bush and Obama) printing lots of money.

What I recommend, instead, is to buy things of lasting value, when you have the money. Things like quality hand tools (I no longer really care if they are made in USA, since Stanley started making them in China - that was the last straw), or a good touring bike, that you have already had your eyes on. I am not advocating gold coins at this time, since the price is about 15% over what it should be, and I would never advocate diamonds or any other jewelry type items. (Pretties, no matter how much the girls like them, are a loser's game.)

I will probably will start visiting this subject approximately monthly.

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