Inflation? Deflation? Should you even care?

Inflation? Deflation? Should you even care? ...as I am obligated to pick sides I will. Then we'll move on to the strange-but-true proposition that perhaps it doesn't really matter. (Yes, for the below purpose we'll stick with the familiar uses of the words and not their definitions... if we did that there is no debate and that takes all the fun out of it.)

We've got more deflation to deal with. Commercial real estate troubles are enough by themselves to keep capital markets in check for some time. That says nothing of the ARM resets that should keep us hopping for the next couple years. Cars, homes, businesses, and more should cost less over the next year or so. This doesn't mean boring things that you use, like food, won't be climbing all the while.

That said, once reality does take hold and we are no able to run in the air by moving our legs really really fast, inflation will set in. Lots and lots of it. That's good news if you have giant piles of debt, a garden, and a limited income. It's not so good for most everybody else. It isn't bad for everyone, but it sure helps a limited number of people.

Why should you not really care? Well, because. You have better things to do with your time; and some well chosen investments will improve your lot no matter which way the wind blows. So below I've broken the vast investment world into three groups so you can know what you should be excited about based on your beliefs (you're welcome):

Things the 'inflation' crowd love to buy:

• Things with lots of long-term fixed rate debt.
• Things with lots of pricing power (they can charge what they want).
• Gold, silver, and bunkers (I'm kind-of kidding about the bunkers).
• Assets that are hard to replace or duplicate.
• Quality properties.

Things the 'deflation crowed love to buy:

• Long-term fixed rate debt.
• Nothing (hold the cash).
• Assets that are hard to replace or duplicate.
• Bumper stickers that say things like 'Gold is a Barbaric Relic' (I'm kind-of kidding about the bumper stickers).

Things you should be buying (understanding values of all manner of assets are going to be tossed around over the next 1,3,5, and 10 years as we (hopefully) finish working our way through this mess):

• Companies with pricing power.  That'd be like a railroad with few/no competitors in it's area.  A major cell network provider. A company that generates power.  A payment processor with an unmatched network.
• Assets that are hard to replace or duplicate.  That'd be the above (really)... and things like quality farmland, companies with strong intellectual property portfolios, water rights, prime commercial property (watch your entry price) and perhaps well positioned energy transport or production facilities.
• Assets priced and based in non-US currencies and locations.  What better way to stay out of the mess than just keeping funds as far from the center of the flux as possible?  Anything that happens here will influence prices and business worldwide... but you can still do well by giving yourself a degree of separation.

So there you go.  Know that there are going to be some very (very) sad pandas on either side of the inflation/deflation thing.  I suggest 'bravely sitting this one out' and not going too gung-ho on either side.  Inflation will win; but it might take awhile.  Instead, just focus on quality holdings that will do well in any environment.  Not very exciting I know; but it will be very (very) profitable long-term.

...you may now feel free to open an account at BOOM Securities, Saxo, EverBank, or even BullionVault.  I would humbly suggest you check-out CompleteIRA.com.  We will help you with a host of ideas of non-stock investments that are of very high quality, and create an IRA or 401k that can work with those things easily.

Investing in quality assets that are easy to work with and understand.  See?  Inflation or Deflation?  Doesn't really matter.

Joshua

(As I can't seem to help myself and its my blog:  inflation - by its very definition - we're going to have long-term inflation. Get thee some quality assets!)