Inflation? Deflation? It’s All About ‘Meflation’

Inflation? Deflation? It’s All About ‘Meflation’

Jason Zweig happens to be one of my favorite financial columnists. Zweig did a fabulous job editing and adding commentary to the recent edition of The Intelligent Investor by Benjamin Graham. William J. Bernstein who is a strong proponent of asset allocation, and admits to the possibility the market is efficient says that Zweig is one of the only two writers whose columns that he bothers reading.

Below is Zweig’s latest article in the WSJ. He discusses the folly of trying to predict inflation or deflation, and advises investors stuck in this quandary how they should invest.

Below is the article:

ExodusPoint Adds 4.9% In 2021 On Rates Volatility [Exclusive]

Michael Gelband's hedge fund ExodusPoint ended 2021 on a strong note after its Rates strategies contributed 1.16% to overall performance in the month. According to a copy of the fund's December update to investors, which ValueWalk has been able to review, the ExodusPoint Partners International Fund Ltd rose by 1.95% during December, bringing its year-to-date Read More

Inflation or deflation?

Pick your poison, says Wall Street. Either Uncle Sam’s borrowing binge will flood the system with money, leading to a replay of the 1970s as inflation eats away at your purchasing power. Or all that debt and the liquidation of distressed financial assets will paralyze the economy and send prices falling, like the deflation Japan has suffered for the past 20 years.

Market pundits everywhere are insisting that getting this “call” right is critical to investing success. The reason is obvious: If you design a portfolio meant to be a bulwark against inflation, and deflation stalks the land instead, your wealth will suffer. Likewise, a deflation-proof portfolio will get killed if inflation takes off.

No wonder online forums (and my mailbox) are full of questions from investors desperate to figure out whether they should protect against inflation or against deflation.

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