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This week’s confirmations of systemic deflation in the Producer Price Index along with wholesale gasoline prices falling below 97 cents per gallon underscore long term fundamental changes in portfolio construction. The discussion of “negative interest rates” is a corresponding concept of great importance for allocation strategies.

For nearly 4 decades, portfolio construction has generally followed a belief that rising inflation was the greatest danger for investors. Central bank policies were also constructed to prevent inflation spirals similar to the United States from 1976 through 1981. Jimmy Carter’s late 70’s “Whip Inflation Now” buttons did little to avert the crisis that took interest rates on the 30 year U.S. Treasury to a peak rate over 14% with inflation estimates running to 19%.

Since 2008 when oil prices topped $140 per barrel and the global economy entered recession, global capacity appears to have, at times, overwhelmed demand for many industries including energy and mining.

“Lower for longer” is a phrase that I first heard in 2012 referring to interest rates that his recently been used by energy analysts that underscores a premise of the age of deflation.

For investors, the implications are just now unfolding.

This week’s program takes a decade forward look at the strategies for real investors based upon estimated forward rates of return.

Graph courtesy of Bloomberg L.P.

Headline Round Up!

  • Real Estate Investment Trust Update: Hedge funds may be handing investors bargains.
  • Good News on National Employment: Jobless Claims the Lowest since November!
  • The Age of Deflation! CPI and PPI Reports.
  • OPEC vs. Texas! Fracking Special Report
  • Richardson Based Fashion Accessories Maker, Fossil, Digs Out a Big Gain for the Week!
  • Dallas Based Trinity Industries Collapses Triple Digits in a Single Day! Why? Cheap Enough?

The 9 Key Components of a great Estate Plan

Featured Research: The Research Round Up!