Would hyperinflation hurt US stocks? I have never lived through a hyper inflationary period, but I do not believe it can be good for US stocks. I can see how the exporters would generate a lot more business and companies with large debt would be able to pay it off much easier(payee gets screwed, so not much of a benefit as a whole), but since the whole system is run with the dollar it seems like investing in other countries would be best for the next several years. Opinions? Thanks in advance for the help.
No one knows. Take a look at the Zimbabwe market, it gained more than their currency lost, but they are a net exporter. Since the US is a net importer, heavily concentrated on services, I think those stocks would get killed (eventually). Since the stocks that depend on exports depend on countries buying that depend on the US as a consumer, well, I don't see how it can be really great for them either. If the US consumer is dead, everything's dead for a while, I don't see how hyperinflation is going to help that too much, but hey, what do I know?
i think that stocks would track higher some which would rely on domestic sales as you said would perform very poorly multinationals would outperform due to offshore non dollar earnings but i would think ultimately hyper would stuff up the global economy....i dont think that inflation across diff sectors will march in loclstep rather like a contagious diseaese there will be ugly sporadic breakouts pockets of deflation eg high end housing luxury items maybe...but hey noone in the western world that is say under 90 has no experience of hyper so its anyones guess
Why would foreigners stay invested in the US market if the dollar started devaluing quickly? This is what I think might be very damaging to US stocks. I imagine there's a lot of foreign money in the market. Say bye-bye to that if the dollar keeps devaluing. Here's what our market is looking like in Euros: http://stockcharts.com/h-sc/ui
Just look at what the stock mkt did during the periods of past high inflation and you will have some of the answer In general, stocks have not been too bad of a hedge against inflation due to the pricing power of firms. In fact, in the world where the value of nominal cash you're paid goes down and there's only limited number of assets you could hold (say stocks, bonds and physical assets), stocks are not bad, since, at the very least, you have a chance of getting more of that not so valuable cash. In that sense they're much better than bonds. Best thing to do in inflationary times is borrow as much money as you possibly can and buy as many inflation-indexed assets as you can. Most stocks are, by construction, inflation-indexed.
right, exactly what I was thinking, but I wondered if the "inflation" of stock prices would be outweighed by the inflation of the dollar. I know Peter Schiff is a guy who focuses on this problem, but I don't think I have ever heard him say where to invest during hyper inflation. He only says to get out of bonds and buy gold or other commodities. On the subject, what are your best commodity plays? I am really thinking about BP, COP and the GDX. Hoping there will be a little pull back over the next couple of weeks though.
I bought BP @ $30. That dividend is incredible and management says it will stay there as long as oil is at $50/barrel.