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DEPRESSION and
DEFLATION not EXACTLY the same......
<FONT color=#0000ff
size=2>
yes, in a
depression, real assets worth nothing, and the US dollar worth little, so gold
shines....can't be printed, can't be forged.....
BUT With a slower
evolving deflationary scenario, all assets groups decline......pricing power is
gone.
This is why
everyone is watching the housing market so carefully.....
as once THAT
market begins to decline, then we are really in trouble and a depression becomes
likely since mortgage holders (banks, etc) begin to foreclose on properties
whose value is less than the principal on the mortgage due.
Once that ball
gets rolling, the government has no choice except to pull an "Argentina" and
massively reflate.....if they can do so in time.
If they can't,
wham, depression occurs....
if they do catch
it in time, then massive inflation results with mortgage holders and other
creditors, the big losers.
<BLOCKQUOTE
style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #0000ff 2px solid">
<FONT face=Tahoma
size=2>-----Original Message-----From: Charles Meyer
[mailto:chaze@xxxxxxxx]Sent: Monday, August 19, 2002 11:39
AMTo: REAL TRADERSSubject: [RT] GEN: DEFLATION AND
GOLD....
Group-
Excerpt below from interview which references price of HM during the great
depression. I wanted to know Pretcher's logic for expecting the opposite
in the event of a deflation this time around.
chas
==========================================================
TAYLOR: Well, I have had some experience in analyzing gold shares in
all sorts of markets. Homestake Mining shared with me their daily share prices
dating all the way back to 1888 through 1998. During the depression, Homestake
Shares appreciated very greatly despite the fact that we experienced deflation
rather than inflation.
BATRA: Did the price of Homestake rise right from the beginning
or...
TAYLOR: No, actually Homestake's share price initially fell too from
$83.50 just before the crash to $65 about two weeks after the crash. So
perhaps the law of substitution did initially apply. But from November 15th
and thereafter, Homestake's shares rose dramatically, to a high of over $500
by 1936. And during 1932, when the DJIA had lost 90%, Homestake's shares had
reached $162. So investors who diversified their portfolios with a little
Homestake were able to travel through the Great Depression relatively
unscathed, while those who owned only the Dow Jones Industrials, were
devastated.
BATRA: Ok, what I am saying is that timing is
important. Gold stocks are also going to do very well. <FONT
color=#990000>However, at this stage, my advice is to start preparing yourself
by buying gold bullion. Then begin buying gold shares the moment there
is a whiff of inflation or when the market begins to favor
them.To
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