Dreman Value Management’s David Dreman:
- Bernanke and Geithner are trapped and powerless to address inflation.
- A market correction is coming.
- Buy a home today, using debt.
Raymond James CEO Tom James:
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Unless you really want one, don’t go buy a house. This guy has mush for brains. Read Philip Tetlock before deciding whether you will put your eggs in this guy’s basket. I’ll take the dart throwing chimp before I take advice from this guy!
Somehow he expects inflation to hit 8-10% at some point in the next five years, despite an agreed upon, long, slow recovery and likely continuing high unemployment, which would prevent raising interest rates. Nothing could be further from the truth.
The only real sources of possible inflation are oil and food. If the economy is in a long slump (very likely) and unemployment remains high (note that the real unemployment rate is much higher than the “official” rate) there will not be enough dollars chasing more than enough goods. Therefore, no inflation, at least not in the lofty 8-10% range! Maybe he was thinking that a continuous stimulus package will eventually lead to much higher inflation, but the stimulus has not been high enough to replace (let alone increase) the spending lost from people losing their jobs and being unable to use their homes as lines of credit. We didn’t have significant inflation before the bubble burst, why would he expect it now?
Thanks. Will wait Jason’s thoughts.
[By the way, I will post and link to your last outputs, soon.]
Fortunately gold doesn’t need inflation to go up. That misperception kept many people out of gold and was one of the reasons why the trade was not actually overcrowded. The dollar is going down, but as Bernanke said, the dollar is only one input to inflation. The US is resistant to inflation in the face of a falling dollar because so much of its trade is internal.
There will come a day when Bernanke’s independence surprises the market, but for now, given unemployment, it is hard to see rates going up, and hard to see the dollar up in a sustained way.
At least the demographic situation of the US is better than Japan’s.
So, no, 8-10% inflation doesn’t seem imminent. Also, in terms of commodity inflation, I have to think that price spikes in energies will be blunted by political and popular will at this point.
Fortunately gold is a relatively useless commodity and may not be subject to the same limits! In itself, rising gold doesn’t hurt “folks”.