Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

Loading...
Most Recent Stories

6 WAYS TO PREPARE FOR INFLATION

David Rosenberg hasn’t changed his deflationary outlook, but he has become a bit more open minded as the rally has confounded even the best of analysts.   In a recent research note he gave investors 6 ways to prepare for potential inflation:

There is no sense in being dogmatic. But just in case inflation were to stage a comeback, this is how one would prepare for it:

  • Precious metals (while gold grabs the spotlight, silver has surged 52% this year and has far outpaced the 27% runup in gold; and the gold/silver ratio, while down from a peak of 84 to 66, is still above the average of 54 over the past three decades).
  • An even steeper U.S. yield curve!
  • TIPS (or real return bonds) — the 5-year TIPS breakevens right now point to an inflation expectation of just over 1.7%, whereas consumer expectations are closer to 2.6%.
  • Short-term duration corporate bonds (and go out the credit curve).
  • Commodity currencies — Canadian Loonie, New Zealand Kiwi, Aussie dollar, Brazilian Real, and Norwegian Kroner.
  • Basic material stocks (including energy) as well as consumer staples (tobacco, food/beverage).

We don’t have a big inflation view, but you never score brownie points by being dogmatic. If (when?) the massive amounts of fiscal and monetary stimulus ever do show through in final inflation (this will hinge on a renewed expansion in household balance sheets and a fresh credit-creation cycle), these are the areas that would likely garner the most investor interest.

For readers who are curious, I continue to maintain my view that deflation remains the stronger of the two forces at work.  Consumer balance sheet de-leveraging will keep CPI from expanding rapidly.  Without a vast expansion in credit I find it difficult to envision a scenario in which prices rise rapidly out of control.  This however, will not keep bubbles from forming in various assets as Central Banks force investors out of low risk assets and into higher yielding assets.  This reckless banking tactic is likely to result in more booms and busts as investors pile into a select few assets to meet their investment needs.  All the while continuing to de-leverage their personal balance sheets and struggle to meet their personal financial needs.  Meanwhile, the investment ideas above will not only become tools to combat inflation, but necessary tools of diversification as investors fight to keep their heads above water….