Business Week: Deflation
Declining interest rates and rising unemployment make me worry about deflation. Japan's been living with it for more than a decade. So what are the implications for investing in the stock market? First off, don't: Japanese stocks have been in a nose dive since 1989. For a business to survive deflation, it needs to keep debt low and avoid long term commitments to buy at a fixed price. Cheap restaurants, discounters, importers and providers of mental health services thrive.
Declining interest rates and rising unemployment make me worry about deflation. Japan's been living with it for more than a decade. So what are the implications for investing in the stock market? First off, don't: Japanese stocks have been in a nose dive since 1989. For a business to survive deflation, it needs to keep debt low and avoid long term commitments to buy at a fixed price. Cheap restaurants, discounters, importers and providers of mental health services thrive.
