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Global Tactical Asset Allocation GTAA Equities − Valuation, From Damien Cleusix
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Tactical, bitchez
Correct me where I go wrong in my reasoning, but it seems to me that the bearishness of equities, which I share, seems to be secondary to the deflation arguement. However, I don't see any real world deflation... I see mounds of inflation, food/energy and other cost of living is exponentially rising.
Valutations have to be readjusted to reflect rising inflation. I don't see how one can argue deflation when governments have been full steam ahead on the printing presses(or just creating digital dollars)...
Perhaps the madness of the markets with its bullish sentiment can be explained by those that realize that real world inflation is here. One share of proctor and gamble is worth one share of proctor and gamble in the future - a percent of a corporation. A dollar today is not worth a dollar tomorrow.
I believe that equities (after another significant drop due to economic turmoil) will surely rise... not in any real value, but in dollar denomination... this can be the only logical outcome.
If there is total collapse of governments, law and order... all bets are off... God, Guns and Gold it is.
disclosure: I have less than 10% of my net worth in stocks, but more than 40% in gold.
What hapens with P&G when inflation destroys all consumers?
I believe that's called stagflation.
septic im not sure where you are seeing all this inflation, its certainly not in house prices, PPI, CPI, gas prices or most retail items that are constantly on "sale" (which are just the new deflating normal prices) to name a few.
yes they are creating currency inflation but it seems the more powerful force is credit deflation as the multi decade credit inflation bubble has clearly ran its couse (ZIRP, rising unemployment, M3 decline, falling prices) They are trying to combat the credit deflation with currency inflation but it is only a short term fix adding to the liquidity in the system that holds up asset prices for a short amount of time. It just means the $ buys less, while the credit deflation continues. the $ buys less but prices fall so people dont need as many of them, people borrow less as they wait for prices to keep falling (you are already seeing this in housing) and that is when the deflation really sets in.
the question is how long does the deflation run for and how serious does it get. Ben and timmy will try to make sure with QE2 that they run the printing press at a faster rate than the credit deflation.
But i have absolutely no idea how this ends. If deflation sets in the only asset class you want to hold is cash but cash is exactly what B &T are devaluing. Makes it very dificult to know where to go so if anyone has any ideas id love to hear them.
septic, just one other thing. Your P&C argument is flawed.
"One share of proctor and gamble is worth one share of proctor and gamble in the future - a percent of a corporation. A dollar today is not worth a dollar tomorrow."
But P&C as a company will earn those reduced value $ in the future. The stock is only worth what its future earnings are worth. if those earnings are going to be worth less so is the stock.
Was at a presentation today by Benjamin Tal, head economist for CIBC, one of Canada's top banks/investment firms. He advised a room of 150 people to be all-in on equities, especially those paying dividends as the economy is not only improving but will be back to normal within 2 years. He says their studies show that only the risk averse over 55 crowd are on the sidelines right now. Really! I'm not sure what is spewing faster or is more dangerous these days, oil or BS. Unfortunately, like Obama, Mr. Tal is a very good speaker and most left the room as "believers".
Banking economists are the worst. They get paid well to sell long and wrong. Most are just glorified PR people who look good in a suit and have an excellent memory for complicated jingoisms.
Awesome presentation. Thanks Tyler.
I have been blogger stalking your site for a couple years now and have gained so much.
Also a month or so ago you posted a link to Seth Klarman's Margin of Safety. Thank You, I have been trying to get that book for years. It is amazing the stuff you guys are able to dig up.