May 10, 2013
By Steve Blumenthal
Hyperinflations, Hysteria, and False Memories – James Montier, GMO
“To say that the printing of money by central banks to finance government deficits creates hyperinflations is far too simplistic (bordering on the simple-minded). Hyperinflation is not purely a monetary phenomenon. To claim that is to miss the root causes that underlie these extraordinary periods. It takes something much worse than simply printing money. To create the situations that give rise to hyperinflations, history teaches us that a massive supply shock, often coupled with external debts denominated in a foreign currency, is required, and that social unrest and distributive conflict help to transmit the shock more broadly.” James Montier
I mentioned James’ piece in last weeks Blumenthal Viewpoint and provide the link today. In a world of out of control money creation, many believe that hyperinflation is just around the corner. My belief is that imbalances can cause reasonable men to do unreasonable things. Behaviorally, how will China react to Japan’s recent central bank move? What about Indonesia, South Korea and Singapore and certainly many others trying to compete on a global scale? Trade gates, currency pegs, tariffs? Stress points become tested. The question is how we humans deal with that stress.
Inflation- I think the global central banks will achieve their objective to create inflation. That means rising interest rates. It is coming. Hyperinflation – not necessarily, but the risk exists. James does a great job in reviewing history. Well worth the read.
Hyperinflations, Hysteria, and False Memories
There Will Be Haircuts – Bill Gross, PIMCO
Bill concludes, “So give your own portfolio a trim as the year goes on. In doing so, you will give up some higher returns upfront in order to avoid the swift hand of Sweeney Todd. There will be haircuts. Make sure your head doesn’t go with it.” It is all about manipulated low rates and the impact of inflation.
http://www.pimco.com/EN/Insights/Pages/There-Will-Be-Haircuts.aspx
Wall Street Journal Live
I appeared on WSJ Live yesterday with Paul Vigna. We discussed current market valuation and portfolio construction. Paul asks, “What is an investor to do today?” Here is the link to the interview.
Note the excessive makeup. Ugh, I remember how much makeup my grandmother used to wear. It was a lot! You should have seen the heat I took at the meeting that followed the interview.
Have a great weekend!
Steve
Stephen B. Blumenthal
Founder & CEO
Philadelphia Office – King of Prussia, PA
CMG Capital Management Group, Inc.
steve@cmgwealth.com
610-989-9090 Phone
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