Comments on: Federal Deficits & Debt: What’s an investor to do? http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/ Mutual Funds, Investing, Retirement, Economy, Personal Finance Sun, 14 Mar 2010 04:33:45 +0000 http://wordpress.org/?v=2.3.1 By: Kurt Brouwer http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2819 Kurt Brouwer Wed, 20 May 2009 16:14:04 +0000 http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2819 Mark--I agree that inflation is not on the way -- it's already here. Admittedly, it's low now, but inflation is running about 1% (annualized) for all items and 2.5% for all items less food and energy. I'll look forward to seeing your thoughts on inflation. Mark–I agree that inflation is not on the way — it’s already here. Admittedly, it’s low now, but inflation is running about 1% (annualized) for all items and 2.5% for all items less food and energy. I’ll look forward to seeing your thoughts on inflation.

]]> By: Mark A. Sadowski http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2812 Mark A. Sadowski Wed, 20 May 2009 00:56:39 +0000 http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2812 Kurt, How much did federal spending increase in real terms PER HOUSEHOLD between 1970 and 2008? Just another one in a series of the Heritage Foundation's utterly useless charts. By the way, inflation is almost certainly not on the way (more on that later). Kurt,
How much did federal spending increase in real terms PER HOUSEHOLD between 1970 and 2008? Just another one in a series of the Heritage Foundation’s utterly useless charts.

By the way, inflation is almost certainly not on the way (more on that later).

]]> By: Kurt Brouwer http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2809 Kurt Brouwer Tue, 19 May 2009 16:22:21 +0000 http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2809 Brad--I've never purchased a revenue anticipation note (RAN) or a revenue anticipation warrant (RAW) so that's a good question. Because RANs are issued in very short-term maturities, muni bond funds typically are the main customers. RAWs can have a slightly longer maturity, but I believe the main buyers would still be institutional. I never heard about the idea that the State Controller could be criminally prosecuted for a default. Seems unlikely though. Brad–I’ve never purchased a revenue anticipation note (RAN) or a revenue anticipation warrant (RAW) so that’s a good question. Because RANs are issued in very short-term maturities, muni bond funds typically are the main customers. RAWs can have a slightly longer maturity, but I believe the main buyers would still be institutional.

I never heard about the idea that the State Controller could be criminally prosecuted for a default. Seems unlikely though.

]]> By: Brad S http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2807 Brad S Tue, 19 May 2009 14:47:36 +0000 http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2807 Kurt, Where can I, as an individual investor, buy a CA Revenue Anticipation Warrant? I'd like to have one just for the potential confiscatory yield once the voters reject the ballot proposals tonight. I understand that Comptroller John Chiang can be criminally prosecuted if he defaults on those RAWs. Is that correct? Kurt,

Where can I, as an individual investor, buy a CA Revenue Anticipation Warrant? I’d like to have one just for the potential confiscatory yield once the voters reject the ballot proposals tonight.

I understand that Comptroller John Chiang can be criminally prosecuted if he defaults on those RAWs. Is that correct?

]]> By: Kurt Brouwer http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2788 Kurt Brouwer Fri, 15 May 2009 20:18:08 +0000 http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2788 Carol--Good points. Inflation is with us right now as we saw in the core inflation results that were just released. Deflation is with us now in that prices for many things -- can you say commercial real estate -- are going lower. My concern is not for 'normal' inflation in the 2-3% range, but much higher inflation. Normally, government monetary and fiscal actions such as we've seen would be highly inflationary. However, we are still in the throes of a recessionary economy with much lower-than-normal demand. That, and the reverse wealth effect, have caused people to cut back on spending a bit and to increase savings quite a bit. So, far the two trends -- deflation vs. inflation -- seem to be in a rough balance. Once the economy comes out of recession, we will probably see much higher inflation unless the Fed is very nimble and smart. Carol–Good points. Inflation is with us right now as we saw in the core inflation results that were just released. Deflation is with us now in that prices for many things — can you say commercial real estate — are going lower. My concern is not for ‘normal’ inflation in the 2-3% range, but much higher inflation. Normally, government monetary and fiscal actions such as we’ve seen would be highly inflationary. However, we are still in the throes of a recessionary economy with much lower-than-normal demand. That, and the reverse wealth effect, have caused people to cut back on spending a bit and to increase savings quite a bit. So, far the two trends — deflation vs. inflation — seem to be in a rough balance. Once the economy comes out of recession, we will probably see much higher inflation unless the Fed is very nimble and smart.

]]> By: Carol Ward http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2787 Carol Ward Fri, 15 May 2009 15:00:48 +0000 http://www.fundmasteryblog.com/2009/05/14/federal-deficits-debt-whats-an-investor-to-do/#comment-2787 Interesting comment. With the new CPI numbers out this morning I am not so sure about a continued deflationary environment - I'd be interested in your comments about why you think we are still in a deflationary phase. I do think inflation will roar back (Inflation - government's answer to its own high debt). Given the recent attempted abrogation of contracts with the Chrysler bondholders, are you concerned that the Treasury may try to do something similar with TIPS? In other words, TIPS act as a constraint on the ability to inflate its way out of high debt. Or is the TIPS market not that broad compared to general Treasuries? Interesting comment. With the new CPI numbers out this morning I am not so sure about a continued deflationary environment - I’d be interested in your comments about why you think we are still in a deflationary phase.

I do think inflation will roar back (Inflation - government’s answer to its own high debt). Given the recent attempted abrogation of contracts with the Chrysler bondholders, are you concerned that the Treasury may try to do something similar with TIPS? In other words, TIPS act as a constraint on the ability to inflate its way out of high debt. Or is the TIPS market not that broad compared to general Treasuries?

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