Hyperinflation investing themes

Discussion in 'Economics' started by detective, Feb 21, 2008.

  1. 1. Buy commodities. Especially commodities that have a limited supply. That is gold, silver, platinum, oil. The ag commodities will be strong also, but less so imo and also the extreme contango effects of the grains puts a severe strain on longs over the long term.

    2. Do not be quick to short the stock market. Hyperinflation lifts all assets, including crappy ones like US stocks. But they will vastly underperform the commodities and a short US stock portfolio can act as a nice hedge for a long commodities portfolio.

    3. Do not buy bonds! They are the worst investment in such an environment, especially when the government tries to snow over the public with fraudulent CPI data which vastly underestimates inflation.

    4. Long the Asian currencies versus the dollar. The US is turning to an Argentina and Zimbabwe like policy of monetary expansion to keep the system afloat, it all trickles down to a weaker dollar. The Euro is richly valued already, so the Asian currencies are the better refuges for this dollar avoiding money.

    5. Leverage. Refi. Get as many loans under 8% as you can. Put that money to work in commodities and get a much better return than 8%. Borrow like there is no tomorrow! The dollars of tomorrow will be worth much less than the dollars of today.
     
  2. Just a little reminded of what happened last time when taxidrivers and housewifes thought its a good idea to take out loans on their homes in order to buy precious metals so they won't be killed in the rampant inflation of 1979-1981:

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  3. But how does that apply to us? We ETers are waaaayyyy smarter.
     
  4. It was a pretty darn good ride in 79-81. Looking at the charts of that time, that would be a huge incentive to go long oil, the metals, and commodities in general.

    Supply demand characteristics are actually much more favorable these days with all that money from the emerging markets sopping up commodities. That wasn't present almost 30 years ago. Plus, oil production is flattening, and demand is not letting up despite the US economy. A super bullish commodity run that is just getting started.
     
  5. commodities are already expensive. Many people who try to buy in now at a high (especially using significant leverage) stand a major change of getting wiped out if they tank.

    Take a look at what commodities did during the Great Depression. With the subprime mess and huge deficits, we are in great danger of moving in this direction.

    Then, commodities will be the LAST thing you want.
     
  6. US economy is more likely to go the Weimar Republic post WWI Germany route than the Great Depression. We have an easy Fed, rigged inflation data, and every incentive to devalue the dollar from an American perspective, there is no way you will see deflation despite huge debts that won't be repaid.

    Bottom line, when money supply is growing rapidly, there is no chance for deflation.
     
  7. Bob111

    Bob111

    don't buy bonds, buy commodities-kinda hard to compare, because they are totally different animals..generally-yes, i agree, but you can loose your shirt with commodities or currencies..
    for many folks-it's way too risky..
     
  8. A question on inflation:

    How can we have inflation if the credit markets are broken, the oil for the global economy, with less cheap money flowing around won't that slow down all economies and demand for goods significantly?
     
  9. Doesnt matter, thats whats happening. people want hard assets not POS financial assets.
     
  10. Thats what they said about houses after the stock market bubble burst.

    Just remember, the asset value you care about, the marginal change in it, is all INTANGIBLE. You don't enjoy your increase in the value of gold unless you sell and time it before it too collapses and big players search for the next best thing.
     
    #10     Feb 21, 2008