Ik heb het al vaker gezegd en deze columnist zegt het ook: kijk naar de obligatiemarkt, die heeft bijna altijd gelijk.
MARK HULBERT
Deflation vs. inflation
Commentary: Deflation is more likely than many assume
By Mark Hulbert, MarketWatch
Last update: 11:59 p.m. EDT Oct. 30, 2008
ANNANDALE, Va. (MarketWatch) -- Is the gold market sensing deflation?
It's important to ask this question, because something is most definitely bothering the gold market. Between Oct. 8 and Oct. 23 alone, for example, bullion dropped by some $225 per ounce. It dropped $15.50 per ounce on Thursday as well.
No doubt there are lots of factors that are conspiring to bid gold down. One that I mentioned in a column a couple of weeks ago is sentiment among gold timing newsletters. See Oct.16 column
I was prompted to consider deflation as another factor by recent developments in the Treasury market. That market is many orders of magnitude larger than the gold market, and its collective judgment cannot be dismissed lightly.
And right now, the Treasury market considers inflation to be a far lower threat than it was just a couple of months ago.
Consider the yields on regular nominal, Treasuries and those that prevail for the Treasury's Inflation Protected Securities, or TIPS. The primary difference between these two kinds of Treasuries is that TIPS' yields are protected against changes in the inflation rate.
Theoretically, at least, this means that the difference in these yields will reflect the bond markets' expectation of future inflation.
As of Thursday night, the yield on 10-year regular Treasuries stood at 3.95%, according to the CBOE's 10-Year Treasury Yield Index. The yield on 10-year TIPS, in contrast, stood at 3.03%. The difference of 0.92 percentage points implies that the bond market is betting that the CPI will average less than 1 percent annually over the next decade.
Inflation over the next decade of less than 1%? That seems incredible.
To be sure, the flight to quality in recent weeks has undoubtedly skewed this number downwards. The market for regular Treasuries has received a disproportionate share of that flight to quality, artificially depressing the yields on 10-year Treasuries.
Economists at the Cleveland Fed have devised an econometric model that estimates the degree to which the spread between nominal Treasuries and TIPS is skewed downward by these liquidity considerations. That model recently calculated this bias to be around 0.5 percentage point, suggesting that the true message of the bond market right now is that inflation would average around 1.4% year over the next decade.
That's still incredibly low, given that the CPI over the past 12 months was up 4.9%. It's unlikely that the CPI can start at nearly 5% and nevertheless average 1.4% over the next decade without it actually turning negative along the way.
And that in effect means the bond market is betting on deflation.
This puts into perspective the federal government's efforts in recent months to pour huge amounts of money into the financial arena. That would otherwise be quite inflationary.
But not if the forces of deflation are as large as the bond market is evidently assuming them to be.
And judging by the recent performance of both the bond and gold markets, it would appear as though deflation still has the upper hand.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.