Disinflation

Now that I have my own bully pulpit, let’s makes some waves. It is my personal belief that the Federal Reserve is wrong with QE2, (Quantitative Easing # 2, not the luxury ship from England) because liquidity is not our problem. Government policy is. Very simply, take the uncertainty out of the business world so people can plan, manage and prosper. Or put another way, lead, follow or get out of the way. Which is my mantra to the Obama administration and any other repressive state and local government. Let us businesspeople conduct with an air of certainty and I guarantee tax revenues will flow. Placing our future in the hands of a board of academics (the Fed) is a recipe for disaster. All the artificial stimuli holding up asset prices, specifically the housing market, is prolonging any meaningful economic recovery. Now that we have a foreclosure moratorium, thanks for kicking the can down an even longer road. Let the markets work. At some point, an equilibrium point will be hit and voila, people will realize value and pounce accordingly. Will we get deflation? No.  But if Big Government keeps up it’s spendthrift ways, the chances grow greater every day. Thus, settle in for a period of disinflation, where asset prices keep falling and inflation continues to grind lower, but does not become negative. Guaranteed forms of income are favored, such as state-specific Municipal Bonds, very selective Corporate Bonds and ultra selective Certificates of Deposit. Equities can be employed, but understand the risks, before leaping at an above average yield, which could get wiped out, if equities head south. Focus on Risk, first and foremost, then Return. Failure to do so, can be very hazardous to your financial health.