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Tuesday, January 19, 2010

Reconciling the Inflationist & Deflationist Camps

In Mish Shedlock's latest update (see here) he attempts to reconcile his deflationary bias towards global asset markets with Marc Faber's focus on inflation. He highlights the possibility of a sovereign debt default of one of the PIIGS (Portugal, Italy, Ireland, Greece & Spain) along with other troubled areas such as Mexico along with the housing bubbles in Australia & Canada in particular. Mish's blog goes into more detail than I do here.

The interview on Yahoo's Tech Ticker with Marc Faber can be found here.

Essentially it becomes a meaningless argument as both inflation & deflation in my opinion will happen but at different times in different places. What is important however is how to profit from it.

I am bullish on the US Dollar purely from the perspective that I am an Australian Dollar based investor. It is all relative. A rising US Dollar will merely be the result of a collapse of the Euro and/or the Yen first (which will bring the Aussie Dollar down with it as it has rallied strongly on the back of a recovery in equity & commodity markets), NOT the result in my opinion of an improving US economy. That is an important point.

I am not looking forward to seeing how this plays out.

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