So the Journal’s got a big, splashy story in the paper today, highlighting how some big-shot investors like Bill Gross are worried, seriously worried, like adjust your portfolio worried, about deflation. So I’m looking at this thing, and I’m, like, really? Really?
Now we’re all worried about deflation?
Look, you know your correspondents here at Market Talk have been warning you about the dangers of deflation long before Bill Gross. We’ve been working this story for more than a year. Deflation isn’t like a stock market selloff; it’s a slow motion dynamic, and it’s been building all this time. The scary thing is, too, that it hasn’t even fully lodged itself in the public mind yet.
“Deflation isn’t just a topic of intellectual curiosity, it’s happening,” the Journal quotes Gross, the “Bond King” who runs Pimco, as saying. “It’s an uncertain world that’s tipping toward deflation.”
These guys are buying Treasurys and corporate debt and dividend-paying stocks as a hedge against deflation, understanding how hard it will be for companies to generate profits if prices are falling across the board.
Deflation is the nightmare scenario of every central banker. It’s something that once it takes hold is apparently very hard to fight. Not that they won’t try, they most certainly will, and you can bet your debased dollar the Helicopter Ben will resort to the money drop before he lets demon deflation loose upon the land.
Listen, I’m not getting too deep into this this morning; for one thing, we’ve got another column to write for the paper. But, really, I just wanted to make the point that we were riding these rails long before Bill Gross hopped on board.