I think we’re factoring in some pretty major inflation,” the chairman and CIO of Dreman Value Management told CNBC. The Treasury is issuing billions of dollars of bonds to finance the budget deficit, the Federal Reserve “has been printing money 24/7/,” he says.
“That’s been going on pretty much worldwide, and it’s got to have its toll. Not now, but two, three, four years out. I think we’re going to see inflation probably as bad as say the 1977 to 1981 period, when it was about 12 percent annually.”
He also believes that inflation is very good for stocks and real estate over time. “Markets stay up with inflation, even hyperinflation” Dreman believes stocks will go up much higher over the next 3 to 5 years.
On the other hand, there is Robert Prechter of the Elliot Wave International. Prechter correctly predicted the 1987 crash and last year’s peak in oil prices. He now says we are going to see a year or two of UP in the dollar. He claims that the Elliot wave pattern indicates that the dollar has just completed its 5th wave down and the next cycle is therefore UP. He also indicates that sentiment has reached an extreme at 3% bulls, a level reached only 5 times in the last 20 years.
Prechter also sees the biggest risk as deflation not inflation. Prechter thinks the bursting of the latest bubble will lead to a major economic depression. This will mean significantly lower stock prices in the coming years.
So there you have it- two completely different views from two so called “experts.” The question is, which one is right?
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