RE:RE:The Middle East is a bigger problem each dayWell Retiredgeo, China consumer prices falling back into deflation coupled with factory deflation continuing for the 13th consequecutive month now is causing concern about increasingly weakening demand in China. As you know, deflation is an economic scourge once it establishes itself because people cut back on buying in expectation of lower future prices. A feedback mechanism sets in where falling prices triggers ever decreasing demand triggering less production, higher layoffs, ever less money in consumers' pockets excacerbating demand destruction driving down prices ever lower in a never ending spiral downwards that is extremely difficult to break out of.
One of the effects of this is the old saying "in deflation cash is king" because you can stuff cash under your mattress earning zero returns yet its buying power still increases as prices fall. Not good for equities as companies begin to struggle to remain a going concern for lack of sales revenue.
So if Europe starts to fall into deflation as well as in the major economies in Asia then all bets are off I think. Investors will be scrambling to find safe haven in cash, near cash and solid deflation resistant companies. I reckon that food and energy will always enjoy decent demand. But the demand for oil may contract. The producers will have to adjust their prices by cutting back on supply which they can easily do. But there must be some floor price that most producers will be happy with to keep their operations stable. You mentioned sub 70. Yeah sounds about right to me. Somewhere between 60 and 70 barring any "black swan" events like Iran shutting down the Straits of Hormuz.
Anyway, I'm not smart enough to game this all out but I am wary as are a lot of my family anf freinds who have already gone mostly into cash, cash equivalents like T-bills and solid oil companies.