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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
Related: GDX, XME, TIP, TBT, NEM, ^DJI, ^GSPC
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.

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