what to buy if inflation returns

[maler]

The inflation deflation cycle has been around since forever.
You can go back to ancient Rome and see that Caesar had to
deal with real estate bubbles bursting.
Modern day central banking uses the deflation period
as an opportunity to engage in debasement.
Under the excuse of fighting deflation,
massive ammounts of new currency find its way into the pockets
of a select few.
So yes, we had deflation since 2000 if you use a hard unit of
account as an ounce of gold to measure prices,
But you do not see lower prices because the massive
deficits debased the dollar even more.
Gold is more of a hedge against debasement.
It goes up in periods of financial repression, when
interest on cash does not preserve the purchsing power,
and goes down when real returns (interest in
excess of inflation/debasement) are positive.

 

[oldtime]

Quote from maler:

The inflation deflation cycle has been around since forever.
You can go back to ancient Rome and see that Caesar had to
deal with real estate bubbles bursting.
Modern day central banking uses the deflation period
as an opportunity to engage in debasement.
Under the excuse of fighting deflation,
massive ammounts of new currency find its way into the pockets
of a select few.
So yes, we had deflation since 2000 if you use a hard unit of
account as an ounce of gold to measure prices,
But you do not see lower prices because the massive
deficits debased the dollar even more.
Gold is more of a hedge against debasement.
It goes up in periods of financial repression, when
interest on cash does not preserve the purchsing power,
and goes down when real returns (interest in
excess of inflation/debasement) are positive.

you got that right, I'm only here because of what I'm getting in the money market. Either way, gold or cash, it's just a parking place, not a home.

 

[billyjoerob]

Quote from sprstpd:

It's possible that you are right, but it's possible you are wrong. I would say that there has never been any deflation in the last 11 years so your central premise is invalid.

Like I said, the gold bugs are masters of ignoring evidence.

Here is a data point with a 300 year history. Admittedly this is the UK, but still relevant:

http://digressionality.blogspot.com/2012/08/yield-on-british-perpetual-bond-is-at.html

Basically, the consol has never been at a lower yield.

 

[oldtime]

Quote from billyjoerob:

Like I said, the gold bugs are masters of ignoring evidence.

yes, and so are you, and that's why you will always be stuck in the middle until you change your ways

I don't know who you think you are fooling

take it somewhere else

 

[billyjoerob]

what does "stuck in the middle" mean?

this is my thread, oldtime. You take it somewhere else. I don't see you adding any value to the thread so far.

 

[oldtime]

Quote from billyjoerob:

what does "stuck in the middle" mean?

this is my thread, oldtime. You take it somewhere else. I don't see you adding any value to the thread so far.

oh sorry man, I didn't realize this was "Your Thread" I thought it was a public forum. From now on I'll keep my thoughts to myself, and you can talk to yourself.

 

[clacy]

Quote from billyjoerob:

No, you don't know what I already knew, sorry. Here's the problem for the gold bulls: THE RALLY ALREADY HAPPENED. It might last for a blow-off top, but the gold rally already happened. When the inflation arrives, the gold bulls are going to sit and wait for the RALLY THAT ALREADY HAPPENED. Meanwhile, interest rates will rise from the current low of 0%, destroying gold as savers find relief in interest bearing assets. Gold is not an inflation hedge, it's a deflation hedge. That's why we've had an 11 year gold rally in the midst of the total collapse of the long bond. What is it about the facts staring the gold bugs in the face that they can't see.

Gold, IMO reacts more to low/falling/negative real interest rates. When rates eventually rise of necessity, gold could be in for a big tumble. I'm not sure when that will be if ever in the next 10 years (look at Japan).

However, to your point, there are times when inflation hits and the Fed reacts by tightening to slow it down. In that case short term treasuries or short term tips would be my choice.

For standard inflation with low real rates such as we have currently, some of the following will hedge very well IMO:

gold
REIT's
LTPZ (long term tips)
XLE (energy)
DBC (commodities)
DBA (ag)
MOO (agribusiness)
PRPFX (inflation hedged mutual fund.... holds gold, silver, natural resource stocks, Swiss Franc)

 

[sprstpd]

Quote from billyjoerob:

Like I said, the gold bugs are masters of ignoring evidence.

Here is a data point with a 300 year history. Admittedly this is the UK, but still relevant:

http://digressionality.blogspot.com/2012/08/yield-on-british-perpetual-bond-is-at.html

Basically, the consol has never been at a lower yield.

I don't understand why you think bond yields have anything to do with inflation, especially since they are heavily manipulated by the "central planners" of countries that have a large incentive to keep rates low.

 

[Zr1Trader]

"what to buy if inflation returns?"


Whiskey, lots of whiskey

 

[billyjoerob]

Quote from sprstpd:

I don't understand why you think bond yields have anything to do with inflation, especially since they are heavily manipulated by the "central planners" of countries that have a large incentive to keep rates low.

http://delong.typepad.com/sdj/2011/09/gibsons-paradox-and-the-gold-boom.html

"Gold is and always has been a super Treasury bond: a very long duration asset that is or at least is perceived to be "safe" in the sense that its price does not trade at a discount (due to risk and default premia) from a Treasury bond of the same duration but instead trades at a premium.

. . .

Basically, gold pays no dividends or interest. It is thus expensive to hold in your portfolio when real interest rates are high, and cheap to hold it in your portfolio when real interest rates are low. When interest rates are high, you have to be pretty confident that gold is going to rise in price in order to hold it in your portfolio--which means that when interest rates are high you sell gold unless you think the price of gold is low."