Sunday, June 05, 2011

CLSA's Russell Napier on QE2's Failure, and His Outlook on Inflation - Deflation

A Scottish financial historian with an S&P target price of 400?  Be still, our beating hearts!

CLSA's Russell Napier is my new favorite - take a listen to his interview with Financial Sense's Jim Puplava.
He believes that QE2 has failed in terms of reigniting credit growth - at least here in the US.  But we are now exporting inflation to our emerging market creditors.  So if the US turns to a policy of "QE Infinite" there could be significant pushback.

(By the way, I agree 100% with his take on "Deflation in the Old West (US, Europe... and Japan), Inflation in Asia and Emerging Markets" - we're seeing that today).

I also appreciate his take that the US treasury and stock markets are both quite overvalued by any measure, thanks in large part to the Fed's QE events.  I've been arguing that we're still in a secular bear market, and we'd be fine forgetting US stocks until they are sporting P/E's of 8 and yields of 5-6%.

Napier cites the Singapore dollar as a potential "new Swiss franc" - as the Singaporeans have been allowing their currency to rise, to combat the aforementioned forced import of inflation from the West.

Finally he thinks the developed world could slump into a deflationary depression environment, while yields simultaneously rise (a la 1931).  Maximum pain for all!

Again, here's the link to the full interview.


Hat tip JL for sending this along!

1 comment:

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