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30 Years of Inflation Coming, But "Deflation Scare" Not Over Yet, Cycle Maven Says

Posted Jun 22, 2009 07:00am EDT by Aaron Task in Investing, Commodities
Everyone is right to fret about inflation but the "deflation scare" isn't over yet, says Charles Nenner, founder of the Charles Nenner Research Center.

Renowned for his cycle work, Nenner sees deflation remaining dominant until year-end and inflation not picking up for another 18 months. But that will be the start of a 30-year (yes, year) upcycle for inflation says Nenner, who spent 12 years as a market-timing consultant for Goldman Sachs.

The investing implications of this scenario are clear:

  • Nenner is bullish on gold for the long-term and even more bullish on gold mining stocks, which he says are currently cheap relative to bullion.
  • After a secular decline, Treasury yields are set to rise, with Nenner predicting the 10-year yield will reach 5.50% by Spring 2013, a 45% rise from Friday's close of 3.78%.

What's less clear is the timing of this trade. Nenner believes the "deflation trade" is about to reassert itself in the short-term, meaning strength in the dollar and Treasuries, and weakness commodities and equities, as we'll discuss in more detail in a forthcoming segment.

For those who believe the dollar is doomed, Nenner notes "all currencies are bad." In other words, currency trading will be a game of relative bets vs. a one-way trade against the greenback, as so many expect.

103 Comments

drchemp
drchemp - Monday June 22, 2009 07:18AM EDT

Intuitive improvisation is the essense of genius

Michael
Michael - Monday June 22, 2009 07:19AM EDT

Sounds terribly true

David
David - Monday June 22, 2009 07:27AM EDT

At least he has the currencies right for sure. If we would look back at the results oc currency debasements over the last few thousand years, the results are always the same. The manipulors play for a while but the day of reckoning always comes. The wise man said, "The definition of stupidity is when something has been tried before, and it is tried again, hoping for a different result". Have we tried again? Uncle Davie

tom k
tom k - Monday June 22, 2009 07:27AM EDT

Skeptical reasoning as 30 yrs is long time !

Yahoo! Finance User
Yahoo! Finance User - Monday June 22, 2009 07:54AM EDT

Short term deflation followed by long term inflation presents a potentially wonderful opportunity for those not weighed down by debt and thus able to act quickly and with conviction.

I'm Just saying
I'm Just saying - Monday June 22, 2009 08:03AM EDT

Heck, I just read a couple articles over the weekend where economists were predicting the recovering beginning to show its strength 4Q2009 and more in 1Q2010. Of course, they really could not produce evidence as to why; they could not explain how mortgage rates were high; they could not explain why unemployment is going to exceed 10% by year end; they could not explain how more foreclosures are rising; they could not explain why .... Golly, they couldn't explain anything other than the economy was going to recover..... hmmmmmmmmmmmmm

marx
marx - Monday June 22, 2009 08:10AM EDT

IMF is sitting on tons of gold so be careful with holding it

marx
marx - Monday June 22, 2009 08:10AM EDT

IMF is sitting on tons of gold so be careful with holding it

kenneth
kenneth - Monday June 22, 2009 08:14AM EDT

He sure is at the other end of the spectrum on the dollar vs Jim Sinclair. My bet is on Sinclair.

Yahoo! Finance User
Yahoo! Finance User - Monday June 22, 2009 08:15AM EDT

this guy is a REAL BIG SHOT on wall street he was a CONSULTANT for GS! TOP SHELF TALENT HERE -BIG SWINGING D**K! CONSULTANT!!!!!

Art
Art - Monday June 22, 2009 08:20AM EDT

Crude oil may be the international "currency" of choice for the future. Use dips to horde.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Monday June 22, 2009 08:29AM EDT

the man is rite on! support your town.......shop around!

Ted
Ted - Monday June 22, 2009 08:30AM EDT

Deflation would be a good thing. Prices need to come back down to affordable levels. People can't afford $5 gas or million dollar beach houses anymore. $1 a gallon gas sounds more like reality. They should stop trying to prop up prices and let them fall for a change. That would help the average person. Back in 1930, the farmers set up roadblocks to cut off the supply of crops in an attempt to keep prices up. Today, it's being done again. It wasn't a good idea then and it isn't one now.

franck s
franck s - Monday June 22, 2009 08:33AM EDT

One of the Yahoo economic headlines this morning states that oil is falling today because faith in the reviving economy is fading. The pity is that Wall Street now presents wild speculation as part of a thriving economy.

Michael
Michael - Monday June 22, 2009 08:48AM EDT

A lot of the people arguing that the economy i

Michael
Michael - Monday June 22, 2009 08:48AM EDT

A lot of the people arguing that the economy i

Michael
Michael - Monday June 22, 2009 08:49AM EDT

A lot of the people arguing that the economy is going to recover are people whose own jobs depend on the economy recovering soon: politicians, economists, stock brokers, insurance executives, CEO's of leading companies.... Wishful thinking is guiding their vision. I don't see inflation being the problem. The Fed is throwing a huge amount of money into the black hole of deflation. What happens to matter when it gets thrown into a black hole. It disintegrates. We are going to see all asset classes (except perhaps gold and silver) decline in value all over the world. Once the deflation starts, the only thing that can stop it is....time. The black hole will consume matter for ever until the clock goes off (2019 by my reckoning), then it will transform into a white hole and begin spitting matter out again. We're all going to have to wait. Re-expansion is a long way off.

Michael
Michael - Monday June 22, 2009 08:49AM EDT

A lot of the people arguing that the economy is going to recover are people whose own jobs depend on the economy recovering soon: politicians, economists, stock brokers, insurance executives, CEO's of leading companies.... Wishful thinking is guiding their vision. I don't see inflation being the problem. The Fed is throwing a huge amount of money into the black hole of deflation. What happens to matter when it gets thrown into a black hole. It disintegrates. We are going to see all asset classes (except perhaps gold and silver) decline in value all over the world. Once the deflation starts, the only thing that can stop it is....time. The black hole will consume matter for ever until the clock goes off (2019 by my reckoning), then it will transform into a white hole and begin spitting matter out again. We're all going to have to wait. Re-expansion is a long way off.

Sarah
Sarah - Monday June 22, 2009 08:52AM EDT

Suzy says...There is only so much gold in the world, you can't cut a tree and make more gold. BUT, the Chinese, Japanese, Germans, Australians, British, Spanish, GCC countries, etc...Have been printing money out of thin air....Nothing backing all this money except your faith. If we all have $100 dollar bills, the shop keeper will raise the price to $100.

AndrewJ5267
AndrewJ5267 - Monday June 22, 2009 08:53AM EDT

Deflation, followed by Inflation. Yeah, no kidding! Basic principle of fluctuation. 30 years of inflation? Based on what? Home prices? Homes are more affordable now than before, so no sense there. And with people able to afford homes more easily, no need to increase workers' pay, so no need to increase consumer prices ... and then if social medicine becomes reality, we will definitely see some interesting 'accounting practices' occur for a while there, but still no reason for inflation. So I can only guess the reasoning behind the inflation forecast, is the basic fluctuation principle ... no genius insight needed for that!

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