Two of the most renowned investors and market commentators in the world are concerned about inflation. The money printing mechanisms of the Federal Reserve and all the bailouts will make the deficits balloon and force the United States to monetize its huge debt.
In his most recent comment, Marc Faber even said that inflation will eventually be higher than in the seventies.
“My view is that, eventually, we will see a much higher inflation rate than in the '70s. In the short term, because of the collapsing asset market and increased savings rate in the US, we will see deflationary pressures. But in the long run, we'll have a much higher inflation rate. That will be negative for US bonds and equities.” MARC FABER
Peter Schiff wrote recently that the only weapon the Fed has to fight this crisis is pure undiluted inflation. In his words,
“This week the Federal Reserve finally made clear what should have been obvious for some time - the only weapon that the Fed is willing to use to fight the economic downturn is a continuing torrent of pure, undiluted, inflation.” PETER SCHIFF
Schiff`s fear is that the Chinese, the Japanese will no longer buy our bonds and we will have to print the money the foreigners won`t lend us. This has a major inflationary impact. How can we protect ourselves from inflation? What should we buy? Jim Rogers thinks that agriculture commodities and silver (still 50% below its all time high) offer the best inflation hedge and profit potential. Marc Faber likes some commodity producers like Newmont (NEM), Novagold (NG), Freeport McMoran (FCX).
I think the best way to play an inflationary scenario is to short long term government bonds. You can do this buying an ETF like TBT or short the CBOT 30 Year Tresuries Futures. Regarding treasuries, Marc Faber recently wrote, "Government bond market is a disaster waiting to happen".
Let's try to make a profit from that impending disaster.
Posts
Big brains collide.
ReplyDeleteImmovable force and irrestible object.
Roubini vs Faber.
Who do you like, and when?
i fear that this deflation may last for several years, and destroy all these inflation plays like gold and other commodities in that interim.
ReplyDeleteultimately when the government must decide to either increase taxes, cut spending or inflate away the debt i think they will take the inflation path, but in the meantime i continue to recommend keeping your powder dry. sometimes being too early is just as painful as being wrong. when the big move in assets really starts there will be lots of time to jump on board. this summer will be key to establish golds direction which i think may be shockingly down