by Rick Ackerman
RickAckerman.com
The inflation trade is struggling for loft, a potential victim of its own, wild popularity. “We don’t have strong reflation-trade momentum at the moment because people are waiting for more data,” said Daniel Tenengauzer, markets strategy chief at Bank of New York Mellon. By his logic, all that it would take to stoke inflation would be a little more…inflation. So much for the markets’ supposed gift of prescience. Tenengauzer and his flock should instead be asking themselves when was the last time every investor on the planet got on the same side of a bet and made money. Answer: never. That hasn’t stopped them from praying that Tuesday’s release of CPI numbers for March will show a significant jump. Don’t these guys know that the harder they hope for statistical evidence of inflation, the less likely it is that the markets will move their way if and when it comes? Buy the rumor, sell the news, as the saying goes.
Prominent among those who have made money for clients in the past by betting against the popular wisdom is Lacy Hunt, chief economist at Hoisington Investment Management. The firm’s official position is that “inflationary psychosis” has gotten too far ahead of the real thing. Hunt is an old-timer who well understands how inflation fears can flout reality – for decades, even –causing otherwise astute investors to do the wrong thing.