December 17, 2010

This quarter, our forecast yields an interesting interpretation that some may consider contrarian and unexpected. Projecting the current trends, we are looking for faster growth and lower inflation than the consensus as measured by the PCE. However, as measured by the PPI, we look for the inflation rate to approach the high single digit range. Add to this the end of the savings glut and an incipient inflation concern, and the scenario is not a pretty one for long term fixed income government securities.

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