Gyroscopic Investing

A lot of us feel this current situation does not fit any of Harry Browne's four described economic patterns.  I know I don't.  We've discussed this before, without any real consensus.  I thought maybe we could revisit it again.  Just throwing out ideas here. 

The first thing I see is that this is the opposite of Tight Money.  So, it's Loose Money, but without much inflation or deflation.  Loose Money is good for stocks.  Can be good for LT bonds, uncertain for gold, bad for cash.  The opposite of Tight Money.  Both TM and LM are direct results of central bank policy.

Another possibility is something centered around ZIRP/NIRP.

Others:
Disinflation
Disdeflation
Benign Deflation (related to Gary Shilling's "good deflation")
Deleveraging

I am attracted to the Loose Money and Deleveraging explanations more than any.  They are closely linked.  Well, you could have deleveraging without loose money.  But you probably would not have loose money if there was not deleveraging.

Loose Money Deleveraging?

What are your thoughts?  Do you even think there is a fifth theme, not experienced or known by HB?

The fifth economic condition is unconditional love

This is the fifth condition: wild money printing that has not yet erupted into hyperinflation.

Libertarian666 wrote: This is the fifth condition: wild money printing that has not yet erupted into hyperinflation.

Wait, I thought it was inflation hawks admitting they were wrong and the universe imploding on itself upon the impossible happening.

I think it's Deflation. I don't think it's a fifth pattern.

Libertarian666 wrote: This is the fifth condition: wild money printing that has not yet erupted into hyperinflation.

The money they are printing is being used to partly buy equity and partly to pay off bad debts the banks created. As the debt is payed off the amount of credit in the economy shrinks and hence there is a deflationary pressure. Though hidden from the public so far. However, as soon the newly printed money starts to leak to the public we will first see an eruption of hyper-inflation followed by a tsunami of debt pay offs and hyper-deflation.

ochotona wrote: I think it's Deflation. I don't think it's a fifth pattern.

Yes, but I think it is a different kind of deflation though.  Central bank activities have made stocks go up.  (Ignoring the very recent downward move.)

So maybe it's different, maybe it's not, probably it doesn't matter as to the PP.

TennPaGa wrote: The fact that there is no consensus illustrates that it doesn't really matter, IMO.

i suspect that if there is a fifth economic condition it would be "the black swan transition", but what to do to protect yourself is a tough question due to all the variables, transitioning from  what economic condition and into what economic condition? and what makes the transition so far out of the norm or extreme?  time frame? societal/political upheaval? radical unexpected moves by big banks or government? large demographics shift? how do you hedge against unexpected weirdness in between economic conditions and what does that hedge cost you during the far far more common normal conditions and transitions..

Lance Roberts, KSEV AM 700 tal kshow host and wealth manager in Houston writes today in his blog:

"Gold is a very speculative and volatile asset class. Gold is NOT a hedge for inflation. Gold is NOT an alternative currency. Gold will not protect you in an economic meltdown. For that, you should own lead with which you can get all the gold you want. " 

IDrinkBloodLOL wrote:

ochotona wrote: Lance Roberts, KSEV AM 700 tal kshow host and wealth manager in Houston writes today in his blog:

"Gold is a very speculative and volatile asset class. Gold is NOT a hedge for inflation. Gold is NOT an alternative currency. Gold will not protect you in an economic meltdown. For that, you should own lead with which you can get all the gold you want. " 

Today I learned that somewhere in Houston there's a guy named Lance Roberts who is 100% full of shit.

Can we short him? 

Libertarian666 wrote:

IDrinkBloodLOL wrote:

ochotona wrote: Lance Roberts, KSEV AM 700 tal kshow host and wealth manager in Houston writes today in his blog:

"Gold is a very speculative and volatile asset class. Gold is NOT a hedge for inflation. Gold is NOT an alternative currency. Gold will not protect you in an economic meltdown. For that, you should own lead with which you can get all the gold you want. " 

Today I learned that somewhere in Houston there's a guy named Lance Roberts who is 100% full of shit.

Can we short him? 

Probably not, he's 85% bonds and cash, 15% stocks now.

IMO, we are transitioning between one of the four conditions. Since we are "in neutral" it is difficult to tell which condition prevails, if any. But in the future, with the benefit of hindsight, it will be clear that we were transitioning into one of the four existing conditions.

ochotona wrote: I think it's Deflation. I don't think it's a fifth pattern.

Agreed.
The overall trend has been deflationary with monetary policy being expanded to conteract the otherwise natural trend.

Libertarian666 wrote: This is the fifth condition: wild money printing that has not yet erupted into hyperinflation.

4x4 wrote:

ochotona wrote: I think it's Deflation. I don't think it's a fifth pattern.

Agreed.
The overall trend has been deflationary with monetary policy being expanded to conteract the otherwise natural trend.

I'm going to go with both A and B. Look at long bond yields in major economies and investors worldwide pretty much agree that there is not much growth going on. They are also saying that there's not much growth expected over the next 30 years or so.

But tech's point also rings true for me... that at some point in time all the additional Dollars, Euros, Yen, Renminbi, etc. have to debase the value of cash. There could be a really dramatic swing the other way, but I have no idea when it might happen so I'll continue, for now at least, to hold a fairly balanced mix of assets. If I had a clue on the timing, I'd be overweight either treasuries or gold.

One of the great things that Harry Browne later said about his own call on gold around 1970 or 1971 was that he got lucky on the timing... that in effect, even though he turned out to be correct, the prediction wasn't really actionable because he couldn't tell you when it was going to happen.