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Investment Talk We're now living in a world of challenging global economy where changes take place at a rapid pace. Investment Talk offers concerned Malaysians the opportunity to express their opinion on the performance of our country's economy in various sectors -- market watch, property talk, money market and others like unit trusts, bonds, bonus, dividends etc.

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Old 14-02-2011, 01:37 PM
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Default No hyperinflation says analyst

No Hyperinflation says Richard Russell

Few investors have been more vocal about the potential collapse of the US Dollar than Richard Russell. But as the recovery builds strength Russell has dramatically toned down his commentary about any potential hyperinflation and collapse of the USD.

In his Friday commentary he said the market action simply isnt even remotely displaying a hyperinflationary environment or even an eventual hyperinflationary environment. And hes dead right (via Dow Theory Letters):

Comment I read a lot about the coming hyper-inflation. If hyper-inflation is in our future, I dont see it in the market action.
The precious metals are hesitating, the CRB Commodity Index is in a bullish trend but is now hesitating, XLE, the widely-followed energy exchange traded fund has been in a bullish trend but is now moving sideways, oil has been declining, and March oil is now selling below 86.

And whats most important (nobody seems to be noticing this) is that Chinese stocks are most definitely in a down-trend. China has been the monster buyer of commodities, and if China is slowing down, that will put a big question market in the hyper-inflation scenario.

One other item if were heading for hyper-inflation Treasury bonds should be falling out of bed. Not so, below is a daily chart of the 30-year US Treasury bond, and its hardly falling out of bed. If theres inflation coming and certainly hyper-inflation, the bond market will smell it. From the looks of this chart, Id have to bet deflation over inflation.

When ever I hear a consensus view of what lies ahead, I always check with the market. If the market doesnt agree, I remain sceptical. As for the current hyper-inflation forecast, Ill remain sceptical as long as the market is sceptical.

Source: Dow Theory Letters

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