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Veteran Contributor

The cash is king scenario


that I talked about a couple years back is now materializing.


To explain further, I expect everything valued in dollars to be priced lower in the next few years.


This includes...









automobiles and energy-


The US dollar and Euro are trading near parity..who would have thought this, ja-

over and out

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3 Replies
Honored Advisor

Re: The cash is king scenario

Two things


1) don't confuse the normal cycles in commodities with a general deflation.


2) dream on about all of them happening all at the same time with out a currency reset.


If that happens the old dollar will not even be equivalent to the  unick court jester let alone the "king"

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Red Steele
Veteran Advisor

Re: The cash is king scenario

We don't have a crystal ball that tells us what the future holds, but my thoughts are that if the country stays conservative in its current if the fall 2014 elections are a barometer of what the countries present mood is, and not an isolated deviation resulting from liberal complacency....then we are actually in for a longer period of stronger US dollars and with cheaper prices for things priced in dollars.


The main thing supporting the land market, the stock market, and housing right now is rock bottom interest rates. Financing is still so cheap that even if you overpay for something, the payments are still pretty reasonable and stocks returning 3-4% are way better than any CD or bond fund. This is probably going to end as many feel interest rates are poised for an uptick, which will make these assets not perform as well, and will cause some price depreciation.


Throw in the effects of free enterprise...where high prices in oil and grain encouraged huge production increases, and you have another factor driving down prices in the short term. My personal feeling is that we will see several years, maybe even a decade of low or stagnant prices in the grains, unless we have production issues, and also in the energy sector as alternative energy sources such as solar panels continue to make a dent. Plus you have wild cards such as low priced, safe nuclear power plants possibly becoming a reality and competition to the fossil fuel industry. And even without any new sources of competition, prices encouraged enough shale and convention production that oil producers are competing with each other around the globe.


Long term...going out 10, 20, 30 years...I do believe that the debt problems that the USA faces with its 20 trillion dollar national debt and its (still) unreined in entitlement spending is going to create a period or periods of hyper inflation to come to terms with this debt and also extremely higher taxes to keep the system going, which will have a negative smothering effect on GNP, business growth, etc. Hoepfully we can kick that can down the road with some sensible reforms now.


If the cost of financing land, or if the alternative returns to cash, would return to a more "normal"  4% to 7% interest rate, we would see land drop as much or more in the next few years as it already has. Obviously the federal government does not want this to happen, as an interest rate increase on $20 trillion dollars of officially recognized debt means real money, amigo money, when the rate goes up and without draconian cuts in entitlement growth, and cuts in military spending, and other areas,even (gasp) crop insurance and farm subsidies, you have some real deficit issues.


Paying down debt, getting rid of surplus and redundant equipment, not buying anything that could mortgage your future ability to stay afloat or even pick up bargains if you have some cash....all of these moves seem to be good survival tactics. History may not repeat itself but it does tend to rhyme with different verses. Cash may not be King like it was in the 80's, but it certainly could become a member of the royal court again, at least for a decade.



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Re: The cash is king scenario

I"m inclined to be liquid as well.


But worth noting that you're betting against the house.


There aren't too many Millionaires Next Door who got there with their piggy banks. The game is to keep asset prices rising and particularly in farming, you have to have cash flow to stay in the game but that isn't what works the magic, appreciation is.


When that doesn't work it is a whole different game.

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