Pento vs. the Deflationists on CNBC Yesterday

By Chip Hanlon | December 04, 2008 | 12:26 PM | 2 Comments

These clips will probably show up on GF's video section later, but I wanted to chime in briefly about our Michael Pento's conversation yesterday with friend, Larry Kudlow, and the rest of his guests. Like Pento, I cannot relate at all to the deflation argument, but the mustard-seeders were giving it to him pretty good. You can judge for yourself who's right by watching below.

First, I wanted to correct one item: in supporting the deflation case, at one point Larry said gold was down 40%, which is innacurate. In fact, it is down approximately 26% from its highs... not thrilling at first blush, but that number looks pretty fantastic when compared to all other asset classes, save the US dollar and Treasuries. Look at this list (foreign markets shown in US dollar terms, which is what matters to US investors, of course):

S&P 500: -41%/ Canada: -52%/ Brazil: -60%, UK: -52%/ Germany: -50%/ Japan: -37%/ Australia: -59% (WOW!), Crude: -67%

Everything's getting sold in a forced deleveraging, including gold, but the yellow metal's performance looks pretty darned good when comparing its actual-- not overstated-- decline vs. other asset classes. This one's certainly a feather in the cap of the gold bugs. 

Part 1:

Part 2:

 

Kudlow... does not handle recessions well at all... The quality of his commentary has really declined over the past 6-9 months. He's so irate and scatter-brained these days on his program, it's quite sad actually because I used to be a big fan of his. Regarding deflation, I feel the views of many of the inflationists are myopic because their theses are all predicated on the belief that because we have a fiat monetary system, deflation is automatically impossible. Deleveraging of this magnitude will lead to deflation just as leveraging lead to the inflation we've witnessed over the past several decades. I trust the financial instrument that stands to lose the most due to the ravages of inflation (bonds) over the one that stands to gain the most (gold) and bonds are clearly pointing towards deflation. In my opinion even though gold has outperformed various asset classes, it has really failed to shine in its moment of glory. Anyway, I always enjoy Pento's commentary, he's got the hide of a rhino to deal with Kudlow on a regular basis. Submitted by Bulleri on Thu, 2008/12/04 - 2:06pm » reply |