Wednesday, April 27, 2005
Inflation risk?
Mainstream media are once again trying to catch up with the inflation that has been there for quite a while. Headlines of imminent inflation risks can be found almost anywhere.
A contrarian thinking, however, would found some questions
A contrarian thinking, however, would found some questions
- What's the timeframe of the inflation risk?
- How much of it is already reflected in the market?
I used to ignore answers to the first question in my investment decisions like shorting long-term treasuries, only to realize even with substantial pressure, they can stay pretty strong. The explanation, of course, is that the in longer term, the market sometimes anticipate a different inflation rate.
