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kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Ok, here is a good article that brings up some very important points regarding stock investing in today's climate. I especially want to point out the comment on deflation. The bottom line whether we are in an inflationary or deflationary period, whether or currency is weak or strong, is the amount of purchasing power that one has for the particular location they reside. Net worth and purchasing power are both relative.

http://www.nytimes.com/2009/04/26/your-money/stocks-and-bonds/26stra.html

Only 4 1/2 years. Not bad overall in my opinion.
 

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randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
lol, who is this article for?

the operative dynamic being deflation or inflation. the two have severely different outcomes.....

I also find it difficult to use the Dow30 index as a barometer for the health of the overall markets since the weaker stocks/companies are always replaced by stronger ones. If the indices continued to include the struggling companies then the indices would trade at a much different level.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
LOL, I did think of you for the title. I always like to look at both sides of an issue since usually reality lies somewhere in the middle. True that the weaker companies would fall out of the DOW. I don't know and would have to look up whether or not any changes occurred to the DOW during the time frame referenced in the article.

A deflationary environment would bode well for the argument laid out in the article. An inflationary environment should conversely benefit stocks since companies would have pricing power. Stagflation would be the quandry. I suppose gold would be a decent holding in that environment as would other physical assets.

My point is that I think it is important to be prepared for multiple scenarios but not be scared that one doesn't act. That doesn't apply to you, but I think there are others who might be tempted not to invest out of fear. I am trying to point out that even in the environment of the Great Depression the investing prospects were not as bleak as commonly perceived.
 

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