FRIDAY NOVEMBER 20, 2009

Someone is going to be horribly wrong!

Don't look now, but the deflation trade is back!  Three month Treasury bills are once again yielding 0%!  Just when you thought it was safe for economic recovery, the stock market goes on a three day losing streak, foreclosure stats look horrible and employment seems to be stuck at the 500,000 per month initial claims level.  Amageddon, here we come!  Deflaton everywhere!

It is remarkable how far apart the inflation expectations are.  Typically, economists will have inflation forecasts that are similar, maybe a percentage point apart.  Today, some economists are calling for deflation, or negative inflation!  Others, including me, fear the long term prospects for inflation.  The market reflects these dichotomy, where T-bills trade at 0% while gold trades over $1100 per ounce!

It will be interesting to see this play out.  One of these trades is going to be horribly wrong!

POSTED AT 1899-12-30 15:58:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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