Apr

30

 I see a drum beat of propaganda about inflation and bonds. This is in conjunction with the need for eternal vigilance against the derivatives. The central banks have such a great foundation and deployment for survival and they must always be vehement in their hatred of the rich and productive. The opportunity to make money by fanning inflation fears and derivatives fears, as well as Iraq, reminds me so much of last April. All I will need is to see is the mavens of the chronic pessimists emerge again on Drudge to know that yet one more abortive squall is hoped for, similar to last year.

But the market, it would seem, never gives it to you twice. The impossibility of getting out of a short this last month with dignity is much more to the point. What does this last desperate attempt to override the 6% differential in favor of equities over stock afford as to opportunity for those who have a grand view?

George Zachar replies:

It is quite consistent to believe that inflation is a problem, that debt is mispriced relative to the erosion of money's purchasing power, and to be constructive on stocks.

You correctly point out the earnings/yield differential between the two asset classes. I would add in the contraction of equity supply due to buy-backs and buy-outs, making for a shrinking universe of stocks relative to swelling money supply.

I am of the non-quantifiable opinion that the willful propaganda here is on the side of the "what inflation?" crowd, trying to wrong-foot folks into sticking with fixed income when stocks are the place to be.


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