"For all of my career, I've been trying to catch people after they do something horrible. For once in my life, I'd like to catch somebody BEFORE they do something horrible, all right. Can you understand that?"
--Doug Carlin (Deja Vu)
Yes, I recognize the deja vu. About one year ago I began reallocating assets to reflect a more inflationary posture. That posture lasted only a few months. Last summer's debt ceiling debate coupled with the EU debacle squelched my incremental inflationary expectations, and I peeled off risk positions in favor of a more balanced posture.
Fast forward to now. Once again I find myself adding long exposure in lieu of a tape that seems to be taking the Fed's "0% till 2014" promise to heart.
Will this action once again prove temporary in a world that's drowning in a debt bubble that wants to deflate? Not sure, but currently my actions need to express a perceived uptick in the odds of Big Inflation on the horizon.
position in SPX
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1 comment:
May be an opportune time to review Nov 2010 piece by James Kostohryz on Minyanville regarding QE and inflation.
My quick take is as follows:
Central Banks everywhere have been expanding balance sheets madly.
Credit demand is too weak at this moment to create enough money velocity to overcome deleveraging and effect broadly higher output given labor and plant underutilization.
Inflation = credit and money supply growth above the rate of growth for goods and services.
Currently, the credit demand side of the equation is harnessing the monetary phenomenon.
But one must accumulate favored assets before accelerating money velocity translates prices higher.
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