Cheap Parking Update

Yeah, an update. See, I don’t want to influence anyone’s investment decisions, so I jot these notes and post them after the fact, like a game to test if my theory is correct. From the forum on May 03, 2012, 06:47:48 PM …

What I see happening is a policy to keep interest rates low and limit the money supply. (This allows borrowers to maintain debt payments if their wages are steady. Inflation slows and if you have cash, things become more affordable, but companies lose money on their depreciating inventory while they made money if they had orders on the books already.) This does chain consumers to a debt for a depreciating asset, but it allows the US govt to pay down its debt without the burden of higher interest. The reduced money supply causes commodities and traditional assets to depreciate in value as the buyer pool is reduced. Cash money becomes the asset of choice because of its limited supply. This policy is hard on businesses with goods in inventory, but they will make up for the loss with future supply at lower cost. However, consumers become cash poor and purchasing is reduced.

Imagine a poker game where you have three cards, money supply, interest rates, and deflation. You play the game to make the other guy eat cards that cause inflation until his savings are used up and he’s in debt, then hit him with deflation and buy up his collateral. But to avoid running out of cards, you steer the game back to inflation and sell the stuff back at higher prices.

Re precious metals. Gold may retain value as an alternative asset class, however if people liquidate gold holdings to maintain their borrowing position, gold may depreciate. If manufacturing continues to slow and production consolidates, silver will reduce in popularity as an industrial commodity and its investment attributes may fall into question. If consumers are cash poor, they aren’t buying a lot of jewelry. If silver is perceived as a commodity with upside value for investors, it could rise dramatically. However, people are turning to cash as long as the money supply is limited. What does it mean when cash is king and consumers don’t have it… deflation.

So, with a short money supply, depreciating assets, debt, and nothing with outstanding asset value except cash, what is left? Work, and buying up cheap hard assets to sit on them. Silver down, bump, and down again. Until there’s more money supply, but I suspect there will be little warning from the money printers. It will come as a thief in the night and people will jump to hard assets to protect their value. Do you buy or wait to go lower? A game of limbo, the big poker game. You can always dollar cost average with regular buys.

This leaves me kind of back where I started when I asked the wife about competitors swiping my ideas. In a deflationary period, the businesses that do well keep their name in front of the customer. Exposure, exposure. Competitors can prime the market, but when someone in my region looks for the product, they will have this nagging sense that they know where to buy it. Let people know you’re the new kid on the block, they need the glimmer. Advertise yourself, the hard work of promotions. And make provisions and sharing a part of your lifestyle.  g


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