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Thank You. Now What?

June 16, 2009 – 3:47 pm

These are really interesting times.  Sure, sure the economy stinks but it’s not as simple as that. I mean there is a tug of war going on as to whether the stink is getting worse or the fragrence of floral perfume will soon be wafting through our nostrils.

Just today I received an email from a financial wizard who tells me that we need to start acting on an inflationary economy.  Then I picked up an article that points out we are in a deflationary economy.  Yes says another article, but the government is spending money like water and huge inflation must follow.

Of course goes another pundit, but manufacturers are operating dramtically below capacity and even if the first tiny hint of an increase in orders is starting to show, it is no where near inflationary.  Yes goes the counter argument, but money pouring into stimulating the economy is reving the engine with the parking brake on. Soon as the brake is released, off we go.

It makes sense says another expert but have you noticed interest rates have gone up and are still climbing?  That will kill stimulation of the economy like a spike through the heart.  The bickering goes on and on between the pundits, experts, gurus, geniuses, economists, mathemiticians and no one seems to getting the upper hand.

So now what?  Good question.  For a real estate investor such as me, the long term key is buying real estate with an understanding that both sides may be right. Deflation in the short run but inflation, or at lease moderate inflation for the mid run. 

With this 2 part theory in hand one must buy real estate knowing that there is a good likelyhood of deflation in the next year and that the purchase price must account for that.  If inflation sets in approximately 2 or 3 years from now, hard assets such as real estate are the very best hedges one can have.  Although no one wants to sell low, the sales that are actually occuring are at prices that should offer the buy good protection through a deflationary economy until things normalize.

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