D Is For Deflation

Just a quick post to get people focusing on Fridays CPI number in the US. Whether we call it negative inflation or deflation (for the record I am clearly confused what the hell the difference is) we should see the first of many negative numbers. Remember the run crude went on in the first half of the year? The year over year changes will look staggering.

I am currently very long gold in this environment and am debating taking some off the table as historical gold does not perform well in deflationary environments. If it were only so simple. We were right in characterizing this move in gold to coordinate with USD strength. Since it appears every currency is in a race to devalue there currency (to increase competitiveness and boost exports) and to cut rates to zero (clearly there are more rate cuts in store of the UK, Euroland, Canada etc) I am less inclined to exit my trade. Since gold is essentially a zero interest rate investment what would I rather own? A currency about to be devauled or a "store of value". I'll keep you posted.....