DEFLATION HAS THE BEST INVESTORS CONFUSED
4 August 2010 by Cullen Roche
6 Comments
The so-called “smart money” is utterly confused by the current market environment. As the Fed has “printed money” investors were convinced that hyperinflation would soon follow, however, the inflation trade has collapsed in 2010 as deflation fears return. Gregory Zuckerman of the Wall Street Journal discusses why the current market environment is so confusing and what some of the smartest investors are doing to prepare for a potential fight with deflation:
It’s called a “dearth of investment opportunities” which basically means the sheep have been sheared so mercilessly that they can’t produce any more wool. So what’s to do? Buy government bonds so the government can collect your interest at the point of a gun? And we call this “capitalism”.
It will be cold comfort, but I will take some satisfaction watching a system based on systematic theft of purchasing power from the poor among others (supposedly for their own good) flounder helplessly because it will not admit it’s basic injustice.
Post bubble is always deflationary…..
post dot-com bubble was not deflationary, deflation will only happen if people are paying back debt en masse and the government spending levels decrease. more likely, a stagflation will run for a decade- think japan.
Bill,
I’m with you. American’s paying off debt en masse, US Federal Govt shrinking the budget and taxes………..Not likely……..but they are printing too many $$$$$$ for stagflation. More likely slow growth ala John Mauldin.
We’ll have to wait for all fund managers to become deflationanistas and then it’s a sign that inflation is/could be just around the corner.
Don’t fight the Fed! Don’t let Bill Gross fool you!
Pimco’s Gross is doing his classic head fake. He tells you one thing
but does another. He knows that the Fed won’t allow deflation and will print money until
inflation comes roaring back.