Comments from Prof. Roubini about coming finanical market

I've just read RGM and found a new article from Prof. Roubini about his view on current economy crisis. His comments is same as before that there will be stagflation in 2009 or it will last for at least for 12 months from now. Bottom is not yet reached and the aggregate demand curve will drop due to drop in investment, commodities and wages. The article is titled "The Dismal Outlook for the US and Global Economy and the Financial Markets". It is worth to read. He has pointed out the future outlook, the environment is getting worser. He wrote the following:

So serious risks and vulnerabilities remain and the downside risks to financial markets will dominate over the next few months the positive news. So beware of those who tell you that we reached a bottom for risky financial assets. The same optimists told you that we reached a bottom and the worst was behind us after the rescue of the creditors of Bear Stearns in March, after the announcement of the possible bailout of Fannie and Freddie in July, after the actual bailout of Fannie and Freddie in September, after the bailout of AIG in mid September, after the TARP legislation was presented, after the latest G7 and EU action. In each case the optimists argued that the latest crisis and rescue policy response was “THE CATHARTIC” event that signaled the bottom of the crisis and the recovery of markets. They were wrong literally at least six times in a row as the crisis - as I consistently predicted here over the last year – became worse and worse. So enough of the excessive optimism that has been proven wrong at least six times in the last eight months alone.

I agree with him as I can see there are many so called optimists in Hong Kong predicting HSI will rise up to 17,000 within weeks after China anounced the 280 billion US stimulus plan. Unfortunately, I think some people trust that still.

However, the question that I am very interested to know is "How to invest during deflation?" During defaltion, everything's price drops.

Finally, I've found a blog telling some things about what to do during both inflation and deflation. In short, during deflation, property is the best. During inflation, cash is king, then gold could be considered. However, I don't know what is CD as mentioned in the article. Will find out what it is.

The following is list of investment during inflation and deflation mentioned in the blog.

Investment Themes For Hyperinflation

• In hyperinflation the last place one wants to be is in cash.
• Commodities in general are a standout.
• Gold is a standout.
• Precious metals are a standout.
• Property is a winner.
• Equities are a winner.
• Treasuries are distinct losers if not an outright short.
• Foreign currencies
• Energy

Investment Themes For Deflation

• In deflation, debt is the enemy.
• Risk is to be avoided.
• Cash is raised.
• Treasuries are sought out as a safe haven.
• CD ladders offer a good investment structure.
• Gold, acting as money does well.
• Select equity shorts or PUTs are a standout.
• Renting as opposed to owning a house should be considered.
• Currency plays