I normally avoid mentioning my own investments when writing my blog, as I think it is a bad idea to appear to be giving investment advice, even if that is not your intention. In the past I have said what I own when it is relevant to the post, and I did mention when I sold off Citigroup as it related to the bailout and stimulus bills, but otherwise I tend to avoid mention of my investments, especially any plans for future investments, but today, as it relates to more general political topics, I am making an exception.

You see, the market is a little down today, but thanks to some peculiar investments (mostly guns, software and oil), my portfolio is up a bit. Since the combination of down market and up portfolio just screams for using my new found margin limits to turn a little profit, I started looking around for something likely to turn a quick profit, so I could get out before my margin limits dropped again (as the chaotic Obama market makes almost inevitable). However, after a little thought, I decided the best opportunity might be a slightly longer term play.

My thought was that the insurers would be prime candidates for some option investments. Likely the market is going to bid them up slightly in the coming weeks. Thinking like many political commentators (and, sadly, some insurance executives), the market is likely to imagine the insurers will benefit from the captive market congress gave them and will bid them up. That should make long term long options bargain investments. And, in my eyes, that is a sure win. After all, as I describe in "Some Questions About Health Care", left wing pundits admitted already the "universal insurance" scheme was intended to destroy the insurers and usher in single-payer. So, is it not likely that in the long term insurers will either be forced to liquidate their health insurance divisions or face bankruptcy as the government forces ever more coverage with ever reduced premiums?

Fortunately, right before I hit send, I had a second thought, and that second thought is the subject of this post.

Yes, in the long term those stocks will face certain trouble, but will they be selling below current price? It sounds foolish, as how could they fail yet go up in value? But the truth is, prices are measured in dollars, not absolute values, so it is quite possible they could fail, yet the price rise. And that was what stopped me.

After all, we have yet to feel the full impact of the Obama stimulus bill, and that alone will likely drive prices up somewhat. On top of that, I expect the new health care bill to drive unemployment levels up. Since that will be dangerous in an election eyar, I fully expect another pork laden bill to be forced through in 2010, as well as any number of "stealth" expansions of the money supply, as Obama strong arms the Federal Reserve into inflating in hopes of "jump starting" the economy. As the economy is already shaky and faith in the currency is low, I expect such efforts to trigger strong price escalation, not only because of worries about economic stability, but ebcause any monetary expansion, coming on the heels of the stimulus, will likely convince investors and bankers that the money supply is entering a phase of regular, massive expansion.

And that is a recipe for incipient hyperinflation.

Even if we don't get soaring, daily price increases before my options come due, the phases preceding it could show enough price gains to eat up every dime of profit I could anticipate. And so, while the insurers look like the weak member of the herd, likely to be overvalued in the near future, with a tremendous drop in worth just around the corner, uncertainty about the worth of money makes me very hesitant to invest.

And that is my point. Inflation makes planning, not just investment, almost impossible, at least no better than gambling. If the money supply is in flux, am I betetr off making sound investments and hoping the money stays stable enough to make them pay off, or should I just put my money in anything and hope lax credit makes everything soar as it did in the dot-com bubble? And if so, when do I get out to avoid losing it all in the inevitable crash? And those are just the first few questions that come to mind. There are many, many more. Thanks to our managed currency, there is simply no certainty possible when it comes to things financial.

And that is a very dangerous situation, and one certain to cause economic woes for years to come.

DISCLAIMER: None of this is intended to function as investment advice. Of course, if you actually read the post, it is all about how difficult current circumstances make investing, so you would have to be an idiot to even think it is suggesting an investment. But as lawyers have won suits based on the behavior of idiots, I am adding this disclaimer. So, again, do not invest based on my thoughts. If you do so, you do it at your own risk.

POSTSCRIPT

For a bit more on the same topic, I recommend reading "Inflation and Uncertainty", "Bad Economics Part 7" and "Bad Economics Part 8".