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We have not had a depression for 70+ years but now.. now that we are
coming off the bubble and the insane values that bubble placed on
equities, we are headed for another depression???? Isn't it
possible that equity prices and PE ratios are simply returning to
historic values and common sense pricing? We still have growth ..
small but real.. would you rather have that or the pretend growth of the
bubble?
A lot of worthless companies are still folding their tents. Were it
not for the bubble, they wouldn't have had a tent to fold. (Does
anyone think Ebbers could pull of his magic show again today?)
Crooks are still being exposed. Crooks made possible by the
bubble. This is a cleansing process and it is a good
thing. It is not the end of America. The Chinese are not
taking over. American industry is not doomed and there is not
going to be any depression. The market does not have to roar up or
down you know? I it possible for it to sit in a long term, tight
trading range while the touch up is completed in the process of burst
bubble clean up.
I can make a valid argument that aliens will land in the next year and
the likely hood of that is at least as great as another depression.
Bob
At 01:27 PM 8/19/2002 -0400, you wrote:
DEPRESSION
and DEFLATION not EXACTLY the same......
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.
-----Original Message-----
From: Charles Meyer
[mailto:chaze@xxxxxxxx]
Sent: Monday, August 19, 2002 11:39 AM
To: REAL TRADERS
Subject: [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. 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.
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