01-17-08 - 1

My TIPS are finally doing well. It seems to me we have a pretty high probability of going through the "theoretically impossible" (actually rare) phenomenon of recession and inflation. The domestic US economy is far weaker than it might seem by just looking at the S&P, because large US corporations are doing very well on the international market. The inflation will be driven partly by the extended period of low interest rates and tax cuts, and partly by the low value of the dollar which drives up the price of international goods in terms of dollars (oil is most significant but all commodities are sky high in terms of the US dollar). One might argue that inflation is being kept artifically low by the flood of cheap goods from China which is pegged to the dollar.

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old rants