Question for Economics Experts - riding out the current storm

[milanbenes]

Gentlemen,

if as reports such as this suggest,

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http://www.telegraph.co.uk/money/mai...arclays127.xml

'Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero". ',

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."

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What people do to:

. protect our wealth

. position ourselves to take best advantage of any opportunities



Can anyone define:

Inflation

Deflation

Stagflation



Some thoughts from my side, please correct if I am wrong,

. cash, if we have any cash we should hold it in currencies which are remaining strong like Euro and CHF and avoid GBP and USD, otherwise as the value of GBP and USD falls against Euro we will erode what we have

. property, we should not be too heavy on property as the prices of property and land is going to fall as people's purchasing power is eroded

. au - seems stagnant at the moment



seems to me we need to hold cash in safe currencies


what do you all think ?

Milan.

[sasguru]

With the pittance you have I wouldn't worry.

[milanbenes]

sas,

jokes aside, this is a serious subject, and we can all learn from each other, well probably I will learn more from you lot than you will learn from me, but the main point is, this discussion is valuable for everyone and it is a very naive man who turns his back on such a currently serious subject

so, having said that, what are your thoughts ?

Milan.

[bobhope]

I have learnt so much about finance over the past few years, that I actually feel much less confident about predicting what will happen than before.

Who was it that said econcomics is a knowledge-subtracting subject?

Have decreased GBP exposure - now less than 40% of net wealth

seems to me we need to hold cash in safe currencies

The problem is that all currencies are depreciating, just some more than others.

[milanbenes]

bob,

thanks

it seems to me currently the best hedge is to somehow get into an oil based investment product, but, what about AU and what about holding a safe(r) currency like Euro or CHF, there must be a time approaching when people are going to dive into whatever is the safest currency and which one will it be ?

Milan.

[sasguru]

sas,

jokes aside, this is a serious subject, and we can all learn from each other, well probably I will learn more from you lot than you will learn from me, but the main point is, this discussion is valuable for everyone and it is a very naive man who turns his back on such a currently serious subject

so, having said that, what are your thoughts ?

Milan.

Ok then I'll be serious. I have a very simple strategy: cash is king, currency is irrelevant. My plan is to wait till I judge the bottom of the housing crash ( i reckon 4-5 years from now) and buy up all the property I can ready for the next upswing. Because as sure as eggs is eggs there will be one, even if it doesn't seem so for a few years.

[EternalOptimist]

I am spending.
In times of uncertainty, its difficult to know who or what to trust.
So I have a new car, four holidays under my belt so far this year and a four week trip to oz planned and paid for in September.
I am spending a couple of grand on some house improvements, new fence etc

[HairyArsedBloke]

The problem is that all currencies are depreciating, just some more than others.

This is true; especially the exchange rate to stuff.

Cash is not king, sorry SAS. Although UK interest rates need to be raised a lot to combat inflation and strengthen the pound, they are unlikely to vary far from where they are now because of fears of recession and other political pressures. As a result Sterling is likely to continue to weaken against stuff and will perform worse than other currencies.

[sasguru]

This is true; especially the exchange rate to stuff.

Cash is not king, sorry SAS. Although UK interest rates need to be raised a lot to combat inflation and strengthen the pound, they are unlikely to vary far from where they are now because of fears of recession and other political pressures. As a result Sterling is likely to continue to weaken against stuff and will perform worse than other currencies.

Depends what you want to do. In the long run it'll even out. I doubt the Euro will stay strong for long given the problems the weaker European economies like Spain are in.

[Advocate]

I'm stockpiling none-perishable food items, the pound may rise and fall but a tin of beans is always a tin of beans, it will still make the same amount of beans on toast in 100 years as it does today...not that i'll be able to buy the bread of course!

I'll be rich I tell you... or at least well fed, and maybe a little windy!