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Consolidated Edison, Inc. Message Board

  • wannabe_penguin wannabe_penguin Aug 5, 2003 6:27 PM Flag

    Cracks in the Reflation theory ?

    http://www.economist.com/finance/displayStory.cfm?story_id=1927033

    I am starting to find articles expressing skepticism about Fed economic policy. For quite some time I've felt very lonely.

    I do hope I'm wrong, and Greenspan's plan works out, but I do'nt really believe it will.

    I few of the more negative comments from the link, which mat well be an accurate assessment of our country's current situation.

    "...Many Americans have swapped their old mortgages for new, larger ones at cheaper rates. They have thus continued to build up debt, leaving themselves vulnerable to rising unemployment, or another stockmarket slide, or a fall in house prices.

    When long-term interest rates stop falling, mortgage refinancing will slow. If mortgage rates rise, refinancing could slump. This could cut consumer spending, pushing GDP growth back below trend. ..."

    "....Andrew Smithers, a London-based economist, says that America's extraordinary number of economic imbalances entitles it to an entry in the �Guinness Book of Records�: low personal saving, record levels of household and corporate debt, enormous current-account and budget deficits, and so on. So long as these persist, he thinks, monetary and fiscal reflation will provide only temporary relief..."

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    • wannabe penguin: Thanks for the direct and to the point answer. Much appreciated........
      claimsman

    • There are some who feel more comfortable with a "store of value". Call it a diversification.

      I don't know that America is about to go the way of Argentina though.

      I have found to make money in gold you need to be in it almost from the first moment -- when it takes off you don't get much chance to get on board. You must, thus, endure the hosings to have a shot at the moon shoot - with gold the hosings are just too profound and too long.

    • .....<...Thanks for your viewpoint. I'll forget gold...>

      Yeech! What a close-minded discussion! .....

      I really know nothing about gold, except an uncle told me years ago he bought shares in a very small gold mine in Montana that went bankrupt. So maybe Gold does'nt always work out.

      He used to drive out to the mine now and then, chat with a close friend who was one of the few miners, stick around and share a few beers at a nearby saloon. So maybe it added to the quality of his life.

    • "NEW YORK (Reuters) - Seeking refuge from an imploding bond market and troubled dollar, investors are piling back into the gold sector, driving shares in pure-gold-play mining stocks Friday to their highest levels in more than six years..."

      Odds are 5:1 problems over at FRE or FNM could trigger an economic meltdown, hence the movement towards a "pure gold play" -- but it really isn't unless you are holding "the real things" - as an insurance policy (against an Argentine style wipe-out of the middle class).

    • Good post, and congratulations on being an investor.

      I bought the 10yr TIPS issued in Jan of last year. It was a profitable trade, but would have been much more profitable if I held till June of this year.

      I'm certainly not a believer in the wisdom of the steps taken to fight deflation, and suspect our country will pay a high price in coming years.

      Yes I do more trading than investing, and am 100% Moneymarket at the moment. I'm reduced to a daily check of the Libor rate, up to 1.14%. I've noticed my money marketfund pays almost exactly the Libor rate.

      At least I've got the California election news to keep me interested. Do you have to live in California to run for govenor or to vote ?

    • I prefer not to recommend specific investments, as a general rule. The Consolidated Edison preferreds you mentioned have reasonably good S&P ratings.

      Remember preferreds have high "rate" risk; if the long treasury bond goes to 8% over the next year say, they may sell in the low 20's or upper teens, and they do'nt mature 'till many years in the future.

      On the other hand ED can redeem them on the call date, usually five years after the issue date. And they will redeem them (usually at $25) if interest rates go low enough. That's why they pay more interest than a senior long term ED bond. It gives the company more flexibility in meeting their financing needs.

      I do'nt like the odds right now, If I do buy in the future,I'll stick to A1 and higher rated prefferds.

      Quantumonline.com will give you a lot of information.

    • As one who has been down many of these roads - take care to let what you read of those paid to write something be background - an awareness in your thinking rather than a determinate of it.

      In markets - price matters. Price does not make something untrue but it can make not matter. Those once paying $800 for gold in fear of a very real inflation have long since booked the loss. Those who sold them the gold did not bet against inflation - they just sold for $800 what cost only $250 to mine. The price of inflation protection had become silly.

      The price of deflation protection became a bit silly this sping with people locking in sub 3% returns in 5 year t-notes. Selling bonds this spring was not quite as lucrative as selling gold under Jimmy Carter but the idea was the same.

      • 2 Replies to horatio_of_saratoga
      • Alas Horatio, I do agree. The drumbeat of doom and gloomers is getting pervasive on all the boards. And it is clear they are paid to post by those who want you to sell your stocks so that they may profit. They want you to think they are these deep thinkers who conclude that it is best to just throw up your hands and get out. Of course they better hurry because you know the economy will be humming by the time the election rolls around.
        So what do you think of the price of ED?

      • Do you feel the current price of gold and treasuries represent buying oppurtunities ?

        I do feel the current problems, debt etc. are nearly overwhelming, so will avoid utilities, treasury bonds, and yield stocks for quite some time.

        I've never bought a gold stock. Would this be a good time to buy? I did hear a CEO of (Anglogold? maybe) say they usually hedge by selling part of their production on long term contracts to protect their revenue stream. (I do'nt know what he means) However, he sees no need to do this at the present time, since demand is so strong.

        Disclaimer: I may have misunderstood CEO's gold talk.

 
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