Comments on: Good luck hedging against inflation

By: CiucciNeri

CiucciNeri — Mon, 07 Feb 2011 15:47:47 +0000

The FED in order to fight future inflation expectations will need soon to tighten interest rates and drain liquidity from the system.
The FED should act carefully because by raising interest rates it risks to choke any hope of recovery of the real estate market.
To avoid this happening it should only raise short-term interest rates while leaving the long ones unchanged.
To do so the FED has few tools at its disposal such as to raise the interest it pays to banks for excess reserves, to drain liquidity from the banking system through reverse repurchase agreements ( reverse repos ) and conducting term deposit facility auctions so to reduce the supply of funds that banks lend to each others. Finally it could reinvest the proceeds from maturing longer-term Treasuries, now in its balance sheet, into shorter-term Treasuries.
Regarding instead the long- terms interest rates, the FED should initiate another round of QE and buy 30 ys Treasuries until the end of 2012 so to keep their yields more or less at the today’s level.
To combine this it will not be easy and it will require a fine balancing act by the FED.

By: threeRivers

threeRivers — Sun, 06 Feb 2011 06:50:50 +0000

talking about “stocks” as an asset class is fun and very interesting but an easy way to see that these experts from the IMF are still the same old jokesters they ever were. not once in my 50 years of actively managing my savings did I put ANY money into a stock index fund, let alone a big cap index fund, as the IMF suggests. Cash is an asset class, bonds maybe and big cap index funds, okay maybe. But to most of us the word “stocks”, just as with our own businesses or professions we individually choose, have specific customers and products in mind and we are anything but passive in them. trying to play the entire market, like trying to appeal to everyone, is a losing proposition. we don’t need a study to tell us that.

By: Rickenbacker108

Rickenbacker108 — Sat, 05 Feb 2011 03:10:31 +0000

This would be more useful if “equities” were further classified. It would seem logical that certain sectors would perform far better than others–at least on a relative basis. Further, the [straw man] examples smack of buy and hold, which is not realistic for any informed investor, and certainly not for a trader. There is NO PLACE TO HIDE? Doubtful. Being nimble must be the best option. Finally, there are always some stodcks that simply grow for extended periods of time (e.g., Microsoft, Apple, TNH)–I find it inconceivable that there is no solution. I concur however that there may not be any easy solution–no solution that the average money manager can effect.

By: DrJJJJ

DrJJJJ — Sat, 05 Feb 2011 00:06:28 +0000

We can’t afford inflation for long so I have few worries mate! I worry more about the decade of deflation we face and the moral consequences of monster government spending!

By: martinm7703

martinm7703 — Fri, 04 Feb 2011 20:44:12 +0000

The U.S. has never in its history had as much fiscal and monetary stimulus, yet look where we are. Large caps and techs with big exposure to Asia have spectacular earnings, luxury retailers doing well, and the rest of the economy is still in the doldrums. We have NOT solved any of the over-leveraging problems, only deferred the pain. The Fed, not satisfied that they were unable to fulfill the 2 mandates given them by Congress, now takes on a 3rd mandate: reducing unemployment. They completely ignore the fact that 4-6 % of our unemployment is now structural, not cyclical. Continuing this pursuit of a triple mandate can only lead to hyperinflation.

By: billwonkers

billwonkers — Thu, 03 Feb 2011 16:24:30 +0000

Not a very good article without even a mention of gold or silver.