Monday, January 26, 2009

Thinking about reflation and stagflation

Over the weekend I read a lot of articles regarding the explosion of government debt, and the eventual effect of massive government spending. The signs are pointing to an inflationary rebound, once the systemic deflationary risk is flushed out of the market. Some of the authors feel that inflation will accompany a recovery, while others think stagflation (i.e. tepid growth) will be the more likely result. In any case, I've been looking at commodity plays (oil, metals) as well as the extraction companies (drillers, miners). My next purchases may be in this area, although it may be several more months before I take a meaningful position. As for the short term, my oil drillers did quite well today, which is a nice change from the slump of the past 8 months.