The asset classes that are attractive right now are not the rear view mirror bear market and inflation bets, commodities etc. There are a few of those still attractive (some industrial metals, India steel e.g.) but mostly that is just the latest bubble asset being blown far beyond fundamentals.
Instead, the right asset classes are (1) US financials, a generational sale; use dollar cost averaging, don't try to time it just call the level (2) US preferreds, especially of financials and the more soundly capitalized commercial real estate plays; these can be bought today for 7-12% yields, with 8-9 readily achieveable with a mix of credits (3) some foreign banks, notably Barclays and Deutsche bank, and (4) borderline investment grade debt in the US; add a few very long A rateds for interest rate convexity, and (5) soundly capitalized (leverage 4 times or less) commercial real estate, since rents will hold and funding costs are falling like a stone.
All of them unloved because they are asset classes held in the past at high levels of leverage by many of the players currently in trouble.
You can hedge the dollar risk with a few Euro futures if you like. The Yuan is also sure to appreciate and there are Yuan futures available.
Baron Rothschild was asked the secret of his trading success in the 19th century. He replied, "when the streets of Paris are running with blood, I buy". They were in the revolutionary period, the Napoleonic period, in the revolutions of 1830 and 1848, in the coups of Louis Napoleon, in the 1870 war with Germany and commune. All were panics, and all were buys not sells.
One idea that intrigues me with the "pushing on a string" is the idea that the increase in the money supply, coupled with the lowering of the interest rates, is helping with the financial firms and the sub-prime stuff, as well as buying time for homeowners (i.e. adjustable mortgages won't go up quite as much quite as quickly) -- and this helps the financial companies too.
But this comes at a cost, as those who have lots of money are seeking safe havens after Mr. Housing Bubble are piling into commodities (thereby driving the prices up) at the same time that the secular growth of India and China is driving the commodities up; and of course the increase of the money supply helps too.
So in the short term, what Joe six-pack sees is a lot of talk of "the sky is falling" and all of the policies designed to help "the big banks and Wall Street", while he is faced with skyrocketing gas and grocery bills, and rumors of layoffs coming, just after he thought he had escaped the outsourcing wave. And he has too much credit card debt, SUV loans, and home equity loans for the banks to give a damn...so the feds are providing backstopping to the banks, but they are not passing it on to the beleaguered consumer. (*)
So there is a "Hobson's choice" in the near term: save us from deflation, or screw the dollar and invite inflation?
...and all this, in an election year when the Republicans have no heir apparent to the one President who cannot sound smooth, or sell a political or fiscal policy, to save his life.
Moving on to your post.
What do you mean by "a generational sale"? As in, "once in a generation, so buy now?"
I'd like too, but I don't have enough spare investment money to pick the DEC Computers over Microsoft. Recall the CEO of Bear Stearns was denying any problems just 72 hours before the collapse: how am I to know which investments are "safe"? You know, "don't try to catch a falling knife" and all that.
For the nonce, I took a gander for several hundred bucks in TMA ; I bought at $2.40 a share, and I've lost money, but not interest. Can you suggest a way to figure out what the dilution would do to the share price once the company recovers (i.e., if the company hadn't plummeted from $11 or $12 /share, and suddenly all the convertible bonds bought today were converted to shares at 75 cents, what would the share price get diluted to?)
As far as soundly capitalized real estate, I am worried that there has been a glut of commercial real estate (in general) lately, so I am not sure that rents will hold. However, if a company holds long-term leases, (say of medical office plazas), and the tenant has to pay the upkeep (I forget the technical term for that kind of lease), that would be a good deal.
Cheers!
(*) So therefore, the average person will see less employment opportunity, a withdrawal of credit necessary to buy luxury items, and the cost of staples skyrocketing. Otherwise known as "a falling standard of living".
How much is due to the hangover from easy credit, how much from globalization, how much to govt. debt...?