Opinions on Economic Positions in the next Decade and how it affects your VP

[Greg]

As an opinion piece:

Do people feel within the next decade or two that there will be more deleveraging and deflationary problems or more that there will be inflationary problems due to too much debt so trying to inflate our way our of debt?

Regarding your opinions, are your VP positions reflecting those thoughts? Or how do most people sort out there VP selections?

[MediumTex]

I don't really do any VP investing (aside from the occasional doodling), but there is no doubt that there are secular financial and demographic trends unfolding that are very deflationary.  If, however, central banks are aware of this risk they can engage in efforts at increasing liquidity that may or may not be successful.

In other words there could easily be deflation, inflation, or just a steady monetary state against a backdrop of economic expansion or contraction....which sort of leads you back to the PP.

In coming years I don't think that natural gas is going to be as cheap as it is in the U.S. right now.

[Greg]

I was wondering about the demographic trends of baby boomers retiring and them potentially moving more and more into safer investments of bonds and the like. Granted they might still have stock positions (my father as one of them) because they might live 20+ years after retirement. I am wondering what that then means from the full economic standpoint then.

Also as a sidenote, I love the Ash avatar MediumTex. Is that from the Evil Dead portion of the "trilogy"? It doesn't look like Army of Darkness to me but I could be mistaken.

[Ad Orientem]

Caveat: I have no VP at this time.

MT is right. I can see both deflationary and inflationary scenarios. My gut tells me though that all of the central bankers will do what is needed to break any serious deflation. Currency debasement, it should be remembered, is one way to get people out of debt. If I had to make a speculative bet I would say that inflation is likely to be a major theme of the coming decade. I hasten to add however, that it could be some years away.

Still I have noted one interesting thing which gives me some pause. Almost no one is talking about prosperity as a possible scenario. That almost makes me want to put down a little bet on an economic turn around, though I don't see how it could happen unless all of the money that's been printed suddenly starts to move. But the contrarian in me keeps whispering that what no one expects is often what happens.

[cowboyhat]

Economists at the SF Federal Reserve think PE ratios are going down over the next ten years as baby boomers try to sell their financial assets to a smaller generation x. They have a nice graph in the paper.

http://www.frbsf.org/publications/econo ... 11-26.html

If they are right, there are two ways for PE ratios to come down. Either equity prices could drop (deflation) or earnings could rise (inflation). If they are right, the whichever way it happens now is not a good time to load up on equities.

I'm too stupid and lazy to figure out anything smart for a variable portfolio, but if the paper is right then a second helping of stock in a variable portfolio could be a good move in about 2022.

[Greg]

There's certainly a part of me that likes the idea of "intelligent speculating", if there is such a thing. For instance, I am invested in Tesla Motors (TSLA) because I read up a lot on the company and really like what they are trying to do with their product.

As a broad-based risk categories portfolio such as the PP, I'm trying to determine how much of my whole portfolio I want as VP and where I believe the money will head towards in the next decade or so. Maybe stocks, maybe inflation in my mind. I just think it's easier politically perhaps for slowly inflating debt away versus austerity measures or anything to bring down debt for the U.S.