I've linked above to a newsletter put out by Hoisington Management and it argues that we are in for deflation, not inflation and the long term interest rates will fall, not increase. It is a well written piece and you should pay attention. Right now there is a battle going on (as I've chronicled) between the Inflationists and the Deflationists, both may turn out to be right. I'm not in either camp, the reason I haven't joined one side or the other is that I think both sides have done a good job of making their case and I'm torn. I've chosen to set up my clients portfolio's with enough flexibility to benefit either way, but not in a major or speculative way. I believe we could have deflation followed by a great inflation. This is not to discount the possibility that we will simply enter into an inflationary period. Five years from now the answer will have seemed obvious, today, not so much.
Scott Dauenhauer CFP, MSFP, AIF
