On Thursday I was en route to Montreal for a wedding, and as luck would have it, I received a phone call from Martin Mittelstaedt from Canada’s Globe and Mail. Martin was working on a story about deflation investing for Saturday’s globe – a very well-timed piece given the latest CPI numbers, and Friday’s slaughter in the markets – and he asked me a few questions about my take on deflation investing.
Martin is a very sharp guy who understands credit contraction and debt deflation very well. I was honored to have him share my $0.02 on ways to invest during deflationary times:
In deflation, cash is king, says Brett Owens, editor of the Contrary Investing Report market newsletter.
Money automatically becomes more valuable because its purchasing power increases, and Mr. Owens favours holding cash in the form of government treasury bills. He’s also shorting the S&P 500 index, hoping to make a profit if it declines, which he thinks it will. “I don’t really think there is anywhere safe to be in equities,” he says, and he expects the market will again test the panic lows seen in the aftermath of the Lehman collapse.
Deflation may ultimately benefit the value of the U.S. dollar, in part because it will continue to offer a haven and in part because most international debts are valued in the currency. With U.S. debts being written off or repaid because of the collapse of the credit bubble, Mr. Owens said there is a scramble among remaining debtors to buy the shrinking supply of dollars.
You can read Martin’s entire piece – which features deflation guru Gary Schilling – here.
I thought he did an excellent job with the piece. I was honored to be included and mentioned in the article – and also to be quoted alongside Gary Schilling!
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