Tuesday, February 20, 2018

Boockvar Disagrees With Prechter About Deflation, Sort Of

March 22, 2010 by  
Filed under Inflation or Deflation

Peter Boockvar, Equity Strategist at Miller Tabak & Co, more or less agreed with Robert Prechter’s prediction of some deflation, in the short run.

“We can be in a dis-inflationary phase before we get to the inflation. It’s the reaction to the deflation that gets to the inflation. Debt destruction is texbook deflationary. The problem is that the unprecedented nature of the response to that deflation is why we’ll eventually get to inflation. So we’re not going to go immediately to inflation. And the more deflationary type steps we take, or I should say that we see, in terms of the economic data, the more money printing that will go around the world that will eventually set us up for that inflation. The more deflation will eventually get us more inflation.

Asked, how long is this process going to take? He answered, “The question of when is obviously very difficult to answer. But because inflation is more of a process than an event, we’ve sewn the seeds for that to happen. Again, if there’s going to be more money printing, so eventually we’re going to get to that inflation because I don’t have any confidence that the Fed and Bernanke will pull that out sooner rather than later. You have three ways of paying down debt; writing it off, paying it down, or inflating your way out. And it seems that our government would rather inflate our way out, because it’s the politically easier thing to do.

Boockvar argues that Bernanke wants inflation, otherwise, the discount rate would not be at zero.

Asked what he thought the prospects were for the dollar, Boockvar replied, “The dollar strength is not happening surely because people like The Dollar. It’s because people are selling other currencies, and The Dollar just happens to be this by-product beneficiary, particularly against the UK pound and the Euro. If you look at the dollar against other currencies, the Canadian Dollar and the Australian Dollar, it’s near recent lows. So the dollar strength is very selective here in this move higher and. Getting back to deflation for a second, textbook debt destruction is deflationary. It’s the response to that deflation that’s been so extraordinary that I’m worried about, and the inability of them, in my opinion, to timely extract that, that will get us to more higher inflation, higher interest rates, and a new onset of problems.”

Discussing an investment strategy for the inevitable inflation, as he sees it, Boockvar said, “What this episode has taught us is that there’s a whole world out there, that’s outside of the U.S. If you look at regions around the world, Asia is getting better, Asia is healing. Investors have to learn how to invest outside of the U.S. They have to learn how to invest in non dollar assets; Whether that’s buying a Chinese stock, whether that’s buying an ounce of gold, or if it’s buying the Australian Dollar; Non Dollar asset investing has to be part of an investors playbook, because we don’t know how this is going to play out here, because it’s so unprecedented. The dollar I think is going to be continue to be debased and it’s going to continue to lose its purchasing power, and investors have to expand their investing horizon, and not just focus on the S&P 500, or some stock in the U.S.

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