After this morning's Producer Price Index report, up 8/10% headline, 2/10% ex-food/fuel/stuff folks use every day, Mr. Arnott may be on to something,
From the Orange County Register:
The U.S.has fallen back into recession and investors need to lower their expectations and prepare a different game plan to protect their money and grow it in the years ahead, investment expert Rob Arnott said Tuesday.
“We are diving into the second dip of a double dip recession,” Arnott told guests at a Women Investing in Security and Education luncheon in Costa Mesa. “There are high odds we went into back into recession — 70-30 odds — and the likely tip over was in June.”
Arnott’s view is much more negative than most economists who think the U.S. economy is bouncing along its lows but that gross domestic product remains positive and that the country has not fallen back into recession.
The difficulties the U.S. faces are hidden in part by the way the government measures GDP, Arnott said. He noted unfunded liabilities like Social Security, Medicare and Medicaid are not factored in.That 0.2% core number looks small but it annualizes to 2.5% and was double what the street was looking for.
Because of the economic slowdown, Arnott thinks inflation will remain tame for the next six months and there may even be rallies in the traditional safe-haven of Treasuries during that time. But in the long run, he thinks inflation will be a major issue, which would make Treasuries a poor investment.
He believes the current 3.8% annual U.S. inflation rate will hit 4% by the end of the year and could reach 5%.
“There’s a 50-50 chance we will see double digit inflation in the next 10 years,” he said....MORE