How to profit from Inflation

Discussion in 'Trading' started by pathus21, Mar 5, 2009.

  1. pathus21


  2. Many people would argue that gold is the best inflation hedge, but I would say that other hard commodities (corn, oil, etc...) are a better play.
  3. Illum


    Edit- Apologies, wise crack about deflation, when clearly people are making money globally on inflation bets. Sorry

  4. Buy OTM LEAPS on natural resource companies (calls of course), OTM calls on crude, silver, corn...whatever as long as there's no presence of substantial demand destructiong. Hold calls, wait for rising prices, because inflation will be the topic du jour after 2010.

    Deflation arguement is very valid in the near term, but too much money getting jammed into the system, and as soon as velocity and credit reappear, it's going to be back to the days of 19-year-olds flipping houses in San Bernadino, and everyone thinking they're investing badasses beause of across the board asset inflation. America is trapped in the bubble-bust-bubble cycle, the problem is that we haven't had a meaningful bust in 70 years, and this massive bubble is taking a long time to pop.

    I'm blaming it all on OCTO MOM.
  5. I would say that gold is better suited for a play on inflation expectations, and just like you, I believe that once the expectation of inflation becomes a reality, the real commodities are the ones to hold. Fear + Futrure Expectation of Inflation = Gold Rally.
  6. Read this for a comprehensive look at the various options, based on the previous episodes.
  7. pathus21


    Can you truly profit from inflation or merely maintain your wealth relatively to the rest of the world? I guess that is the same thing and you come out richer in the end.
  8. Profit from inflation: borrow at very low nominal interest rates. Invest that money in instruments that are tied to inflation or receive a higher real rate of return than the nominal rate of your loan.
  9. pathus21


    I was going to bring up buying a house as well. Lever the fuck up and buy a house.

    I don't know if it makes any sense to borrow and then buy securities that profit from inflation. Sounds pretty dangerous and if your timing is off you could get fucked. Where would you borrow anyways?
  10. kxvid


    I would say long gold but short bonds might actually be better. Bond values should go down the toilet. If only the Treasuries weren't being manipulated big time, short treasuries would be the trade.
    #10     Mar 20, 2009