Global Investment Strategies for Deflation

Excerpts from Dr. Enzio von Pfeil's June 18, 2009, appearance on CNBC Asia:

1. Market check - are we seeing the end of the rally?

a. Yes, since 2nd June when the S&P 500 reached 945.

b. This is because the market finally is grasping that the Economic Time® has to worsen in the US and thus globally.

2. US economic data review for indication of green shoots sustainability: Is the recession abating or do we still have a ways to go?

a. The recession has to worsen: less and less imports and waning private consumption reflect higher unemployment and thus job insecurity.

b. Globally the G8 now recognizes what a debt grave it has dug – and already is starting to wonder how to climb out of that grave. If the Economic Clock® keeps ticking worse and worse, then we have the worst of all worlds: tax hikes and a more intensive global excess supply of goods

3. What are the deflation / inflation risks?

a. Deflation is the theme: if you have an excess supply of goods, there is no way that “too much money can chase too few goods.”

b. Besides, the idea that banks have turned the printing presses on is misleading: look at how quantitative easing in Japan has NOT led to inflation!

4. What are your portfolio adjustments for H2?

a. None really.

b. I have maintained my short positions, which are starting to move in my favour.

5. Is there anything else you wish to highlight?

a. The nasty face of protectionism is reflective of the worsening Economic Time®.

• China is instituting a worrying “buy China” policy.
• China wants to impose her brand new anti-trust law outside of China, e.g. in Australia.
• Watch for more “host country protectionism” - my recent book's theme - to rear its ugly head: here, the country hosting the foreign operations of a multinational turns on them and makes lives of such guest affiliates difficult.
• Equally, watch military tensions rise. Wars and “threats from the outside” are a great way for otherwise incompetent leaders to unify their countries – witness what is happening in the Muddle East and in North Korea!