Deflation

Although the "big recession" slightly weaker, we may in a long period of deflation. Retailers under pressure to reduce prices to make sales.

Consumers are less willing to spend money because of high unemployment, depleted savings, investment accounts, wish that more and tighter credit conditions.

What types of stocks you should choose in this scenario?

1. Health care and pharmaceuticals - People are still sick and need medical care - especially in the old post-war baby boom. Medicines, treatments and products have to pass through the expensive FDA approval. This, together with patents, a barrier to entry allow existing businesses to keep up to a certain price for power.

2nd Specialized niche manufacturers - companies that manufacture advanced and specialized products - such as deep-sea drilling bits and heavy industry - should be able to resist deflation. Especially in companies whose products are protected by the patented process, and focus / or require expensive manufacturing processes that make it difficult for competitors to enter the field.

3rd Producers, high-level services - Many products, such as computers, goods where price is a big difference. Companies providing consulting services have also been high (such as HP and IBM) has an advantage over other competitors (eg Dell) because they may lose money on a war, for the products and make their profits under service contracts and consultancy fees .

4th Companies with innovative logistics - An example is Amazon.com and the famous "negative cycle". We must assume that both Amazon and Best Buy and receive goods from a manufacturer to net 45 days terms meaningful (they pay within 45 days). About Best Buy will take 75 days to make setting up, then they must borrow money in 30 days to pay the manufacturer. If Amazon can use the product within 20 days after contact, then they can invest the money in 25 days. This gives them an advantage in a price war.

5th Luxury brands - even if they are exposed to a certain pressure on prices, highest quality brands (such as Gucci, is the iPod, and Mercedes-Benz) always puts a stick, because they are not regarded as a commodity. They are a class of its own.