Low inflation and possible mild deflation for the next 5 to 7 years. Those who are anticipating inflation and higher interest rate will be sorely disappointed.

Silent misery: Actual US unemployment 37.2%, record number of households on food stamps in 2013

“Unemployment in its truest definition, meaning the portion of people who do not have any job, is 37.2 percent. This number obviously includes some people who are not or never plan to seek employment. But it does describe how many people are not able to, do not want to or cannot find a way to work,” he and colleague Megan Russell reveal in their client report, which was leaked to the Washington Examiner.

 The authors then take aim at the so-called Misery Index, which provides something of a pulse rate of American prosperity, based on unemployment and inflation. The Wall Street adviser said the Index, which he maintains is actually over 14, as opposed to the 8 advertised by Washington, fails to address how the US economy is being hugely subsidized by various schemes, including monthly bond purchases by the Federal Reserve.

DYI Comments: Very low inflation or possible mild deflation will be with us for the next 5 to 7 years.  As the Fed's begin their taper and move to more normalized interest rates it will be within the confines of low inflation/deflation environment.  Those who are anticipating a big jump in interest rates and inflation will sorely be disappointed.  More than likely in our anticipated market sell off of stocks there will be the flight to quality especially the U.S. Treasury 30 year Bond.  I would not be surprised to see the 30 year Treasury under 3% and the 10 year Treasury under 2%. This would end the bull market in bonds that began in September of 1981 when interest rates peak at 15.32% (10yr Treasury).  When rates do bottom out they will not necessarily be toxic as deflation will most likely be with us for a few more years. However, once the 2020's approaches and the massive amount of government liabilities come due (S.S & Medicare) the pressure will be on the Federal Reserve to monetize a portion of those upcoming debts.  That will finalize and end DYI's long term bond holdings love affair.  If REIT's are a bargain historically that is where I will shift to.

DYI