Mauldin on Deflation or Inflation, Take Your Pick

It is not a matter of pain or no pain; it is a matter of choosing which pain we will face and for how long, and perhaps in what order.
– John Mauldin, September 2009

We’ve talked about the Inflation vs Deflation debate a lot here on TRB this year, as I think that getting this one question right will have a bigger impact on investment performance than any other question out there.

John Mauldin has, in my opinion, covered this issue better than almost anyone else.  The message of his latest missive is that we haven’t much of a choice whether or not we’re in for either of the two…our choices have become narrowed down to hoping for the lesser of two evils.

From Thoughts From The Frontline:
Just as water is formed by the basic elements hydrogen and oxygen, deflation has its own fundamental components. Last week we started exploring those elements, and this week we continue. I feel that the most fundamental of decisions we face in building investment portfolios is correctly deciding whether we are faced with inflation or deflation in our future. (And I tell you later on when to worry about inflation.) Most investments behave quite differently depending on whether we are in a deflationary or inflationary environment. Get this answer wrong and it could rise up to bite you.

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