While we have been salivating over the extremely low cost of long term debt available to many of the companies in our portfolio we are growing increasingly...

While we have been salivating over the extremely low cost of long term debt available to many of the companies in our portfolio we are growing increasingly concerned about the chance of deflation (still low but increasing). The consensus approach to forecasting inflation appears to be constrained to the size of a positive number. This is reminiscent of what occurred pre-GFC as consensus earnings forecasts came down from double digit to low or flat earnings rather than the required negatives. Many readers of our monthly newsletters will be surprised by our focus this topic, particularly following our prior musings on the risk of inflation. However, given the recent economic developments we think it is worth exploring the core drivers of our concerns and their potential implications. (VIEW LINK)