The Next Boom

Discussion in 'Economics' started by Sikhinvestor, Mar 18, 2009.

  1. Trilliions of dollars are being printed left right and center, I think the stock market is going to go up 500% from here.

    DOW 30,000 by 2012.

    Hyperinflation - Wait until you have to pay $100 bucks for kleenix.
  2. ron2368


    Buy paper stocks? maybe ink too?
  3. Dollars are created with cotton not paper
  4. lrm21


    in the 1970's we ran about 8% inflation.

    What can we learn from Investing in the 1970's? Will the same trends in the 1940's, 1950's and 1960's hold true in the 1970's?

    The table below shows the performance of small cap stocks, large cap stocks, long term bonds, and short term bonds during the 10 year period of 1970 - 1979, as found in the book titled Investments by Bodie, Kane, & Marcus. This period includes high interest rates (20% interest rates on mortgages), high commodity prices ($2.00 gas and $800 gold) and stagflation. Today, the interest rate for mortgages are lower and commodity prices have rebounded with gold about $800. Did anyone make money during this period? What investment did the best?

    If $1,000 was invested on January 1, 1970 here is how the numbers came out:

    Small Cap Stocks = $2,314
    Large Cap Stocks = $1,774
    Long Term Bonds = $1,900
    Short Term Bonds = $1,840

    With the high interest rates, the return on bonds got much better. With the high inflation rate during this period the increases in bonds just kept up with inflation. Small cap stocks came in first with large cap stocks, long term bonds, and short term bonds essentially equal. The high inflation rate sure did change the trend from the 40's, 50's, and 60's.

    Below is a table of the value of the $1,000 investment at the end of each year.

    Year /Small Stocks /Large Stocks /Long Bonds /Short Bonds
    1970 /835 /1,041 /1,127 /1,065
    1971 /989 /1,189 /1,324 /1,111
    1972 /982 /1,416 /1,397 /1,154
    1973 /584/1,207 /1,417 /1,233
    1974 /410 /888/1,495 /1,331
    1975 /696 /1,219 /1,622 /1,408
    1976 /1,077 /1,512 /1,802 /1,480
    1977 /1,314 /1,402 /1,818 /1,555
    1978 /1,607 /1,493 /1,742 /1,666
    1979 /2,314 /1,774 /1,900 /1,840

    Stocks had a lot of volatility during this high inflation period
    Bonds to a better job of providing account balance stability
    High inflation is not good for stocks or bonds
    Bonds had better returns with high inflation
    Stocks need to be held with a longer term perspective
    You can not time the market
    Stocks had up and down years
    Long term bonds lost money 1 of the 10 years, so it is possible for a bond to lose money
    Short term bonds never lost money in a year
    Small cap stocks had more volatility than large cap stocks

    The next boom is commodities.

    Hard assets will have value. Paper assets will not keep up with inflation.

    According to Sally Limantour, Editor, Taipan Financial News, when most folks think of a big commodity bull run, their minds turn to the 1970’s.

    "They remember OPEC, long gas lines, high silver prices, and the Hunt brothers’ spectacular rise and fall. All told, the 1970s commodity bull market was about 9 years in duration," he says.
  5. Im all in Oil at 33 , USO, oil ETFs...Im shitting Oil.....and will continue to place money in oil at every dip.

    But I am biased