Skip to comments.Time for Anti-Inflation Planning
Posted on 11/16/2010 12:22:03 PM PST by BenLurkin
The unease emanating from QE2 is the specter of inflation....
...inflation signals continue to bubble to the surface. Gold, considered a store of value in inflationary times, soared to a fresh string of records after QE2 was announced and now trades above $1,400 an ounce. Prices of other commodities, including industrial metals, agricultural products and oil, also have jumped to new highs. The faltering dollar is both helping drive commodity prices higher and raising the possibility of imported inflation.
TIPS are the most direct way to guard against inflation, and earlier this month an auction of 10-year TIPS had enormous demand, resulting in a record-low yield. That means investors are exceedingly confident that the Fed will succeed in its bid to spark inflation, but it also means TIPS aren't exactly cheap these days.
Advisers recommend that investors hold 5% to 10% of their investment portfolio in commodities, partly as an inflation hedge. This is probably good advice. Food prices are expected to keep rising in 2011, along with oil and metals.
Real estate and equities are tougher calls. The U.S. real-estate market remains moribund and is unlikely to start improving until the jobs situation gets better.
During the inflationary 1970s, however, real estate proved itself as a potent store of value. The J.P. Morgan Chase asset-allocation group believes that QE2 will drive money into real estate and stocks since the Fed is eager to produce some sort of reflationary "wealth effect" that would spur more consumer spending. While it may be tough to go out and buy a house, a REIT fund can provide diversified exposure to the sector.
In terms of stock investing, tilting toward more economically sensitive stocks makes sense if the Fed is to succeed in reflating the economy.
(Excerpt) Read more at finance.yahoo.com ...
Commodity prices broke today. Markets are a crap shoot. It’s more fun going to a casino.
? Stock up on loss leaders at your local grocery or big box stores for nonperishable foods and household products.
I found what I think is an excellent analogy of what is going on regarding deflation/inflation:
Remember that Tsunami that killed so many people a few years ago? I remember the video of the people combing the beaches when the water swiftly receded to record low levels as the Tsunami built. Of course, that was followed by the equally sudden rushing in of the Tsunami waters that wiped so many people out.
I see our current state as that mindbogglingly low tide. Enjoy it while you can - and maybe even find some real exposed treasures - but be prepared to hit the high ground soon. And a lot of people won’t make it.
Hey Ben, not only are commodity prices plummeting, we also got the producer prices deflating. Say what you will about QE2, but this inflation talk won’t wash.
Don’t forget to check your tire pressure on your SUV!
I expect these stock and bond funds will still be decent investments even in an inflationary environment, though -- which is why I still do incremental investing in all of these funds.
TIP’s stink as an inflation hedge. Don’t go near them as it is indexed to the government’s propaganda “see no inflation” measure. Energy and Gold stocks for me. Common stocks will protect you some, at least in nominal dollars. Hard assets the best.
What about real estate for the long term?
Gold fell back to 1339 and the Euro is stumbling and the DJIA is off 177 at the moment (1455 hrs). Nothing looks particularly rosy out there. maybe QE2 is the knockout blow.
Hint. They are not really printing money. In fact cash is scarce.
Hide the cash. They will end up refinancing your loan at negative interest to keep it on the books...Yes it is that bad.
So....I should stuff my mattress with dollar bills?
Paid off real estate as a place to park your butt for the duration is probably a pretty good idea.
Mattress Savings and Loan. A good bet. I have changed from Wells Fargo. No interest either but I got the cash.
Stuff your mattress with dollar bills now and in a little while your mattress will be worth as much as if you had not done that and will be less comfortable. Stuff it with gold and silver coins. It will be even more uncomfortable but will be worth more than the pretty paper.
I just can’t see the inflation coming in strong, there aren’t enough people with money to spend.
The stimulus saved the rich and they aren’t spending and the little guy is sitting around twiddling his thumbs or working part time or for less than before.
Inflation is too much money chasing too few goods but middle class person doesn’t have too much money right now and if some things go up, they will just economize and do with less.
The streets will run with blood before Americans tolerate that much inflation.
I’m sure they would love to blow back up that real estate bubble but I highly doubt they will be able to do it even if obama/congress sign off on MERS the banks are facing huge problems with investors over their fraud.
Mortgage-Backed Securities Without Mortgages?
BofA CEO says foreclosure probe settlement needed
Even if they are able to keep investors lawsuits at bay for a while the number of homes that have been foreclosed or are in the process of foreclosure or homes underwater (worth less then what they owe) is astronomical and people don’t have jobs to buy them anyway.
lol they keep claiming we don’t have inflation but we most certainly do in the things you need everyday like Food, Gas, etc. they just removed those things from the inflation index but we know better when we check out at the market.
Real estate holds its value in inflationary times. In fact, having a large fixed rate mortgage right now is a fantastic inflation hedge. Your house will go up in nominal dollars but of course your mortgage won’t. Pay off your mortgage in 10 years with dollars that are worth 10 cents in today’s terms. Pretty good trade.