By Tom Bradley

Michael Nairne of Tacita Capital recently published an interesting piece on inflation. He pointed out that the bond market has been a lousy predictor of where inflation is going. He showed that the holders of both long and medium-term bonds failed to anticipate skyrocketing inflation in the 70’s and they grossly underestimated the decline in the 80’s and 90’s.

There are learned, passionate advocates on both sides of the inflation/deflation debate right now. Both sides have compelling arguments. As for the less-than-reliable bond market, it’s predicting subdued inflation over the term of a long bond (10 plus years) and virtually no inflation for shorter periods.