People Are Way Too Freaked Out About Deflation

There is inflation in the use of "deflation."

Tom McClellan, editor of the McClellan Market Report, wrote in a post on Thursday that the number of reports about impending deflation have been surging, which could mean the opposite is coming to the market.

"I cannot believe the volume of the news stories I am seeing in the financial media, with people worrying about impending deflation," McClellan wrote. "And as any card-carrying contrarian knows, when a topic gets too popular, you are near a turning point."

Over the last several months, worries about deflation - or falling prices, which economists say indicates a contracting, not expanding, economy - particularly in the eurozone, has been the story in markets.

A number of analysts, central bankers, market participants, and yes, journalists, have noted that a variety of measures - from consumer price indexes to "breakevens" - have been indicating that we are much closer to deflation than inflation.

As McClellan writes, "The basic point for beginning contrarians is to disbelieve most of whatever you are hearing repeated in the financial media. And the more it is being repeated, the more you should disbelieve it. Learn to trust your own analysis, rather than listening to the talking head du jour on TV, even if it is me."

The appearance of "deflation" in news stories is at its highest level since October 2010, and as McClellan sees it, this might put us closer to the opposite occurring in the economy.