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:

Seth Klarman: Investing Is Art First, Craft Second And Science Third

Seth KlarmanSeth Klarman is considered to be one of the best value investors of all time. Unfortunately, he does not give many interviews or lectures. Q2 2020 hedge fund letters, conferences and more Luckily, those interviews and speeches that he does give are stuffed full of information and highly insightful comments that value investors can learn 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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