"Doesn't faber favor initial hyperinflation followed by deflation these days?"
No, as far as I can tell deflation is totally out of the picture in his world view. He also doesn't think we are going to get hyperinflation anytime soon, necessarily, "just" high inflation. Eventually hyperinflation, but not necessarily for many years.
Regarding previous deflation scares, yes we had 'em in the period you mention, but in the same period Gold and Housing and Oil, for example, were all in uptrends.
Faber IS thinking about an asset dip before Bernanke panics:
On April 16th he wrote:
"My advice remains to be extremely defensive... Now, I am not necessarily predicting that we shall soon experience hyperinflation rates in the US, but when the Dow Jones and the US housing market will decline by 10%, it is very probable that Mr. Bernanke will put the money printing presses into high gear in order to fight asset deflation.
...Still, as I indicated last month, aside from bonds, all stock and commodity markets seem to be now overbought and vulnerable to a sharp correction. In fact, whereas I am extremely negative about bonds in the long term, I believe that for the next three months or so, bonds could actually outperform equities and also commodities. "
On February 25th he wrote:
"Now, commodity prices can have big fluctuations, and we have had a bull market now since 2001, Iâm bearish near term about commodities, I think the correction has started, and some commodities like Aluminum, Zinc and Tin have already corrected meaningfully â in the case of Zinc itâs down more than 15% from its recent peak, so a correction has gotten underway. And it may go on further. The peak was I think in 76, and 78 the price of gold went down by almost 50%, and afterwards it still went up 8 times. So we can have a meaningful correction in commodity prices and it still goes up much more than say the Dow Jones over the next couple of years."
and
"Yes, I think we have to distinguish between the period 1980-2000 and the last 5 years, because if you look at the stock market crash in 87, the S&L crisis in 99, the Tequila crisis in 94, the Asian crisis in 97, LTCM and Russia in 98 â it all occurred at the time of falling commodity prices. And so, if you printed money at that time, it didnât flow into hard assets, or commodity prices, but now weâre in a different situation in as far as commodity prices have been rising. So the next time the Fed â and I have no doubt that if the stock market drops 10%, and if the housing market drops 10%, Mr. Bernanke will not cut interest rates in baby-steps the way they have been increasing, but heâll cut them at half a percent at a time, or even 1% at a time, or even 2% at a time to prevent asset deflation causing economic damage. In that situation, I think the dollar could really take a hard hit. As I said before, weâll have to define a âhard hitâ against what? But I suspect that when the Fed prints money the next time, no matter how weak the economy is, that inflation will be a problem still. "
Meanwhile, like you say, many commodities are incredibily strong. I just calculated that the copper pit contract has closed above it's daily 5 SMA for 33 days in a row now!
