Well, it took centuries for Rome to collapse, after they started devaluing their currency with abandon. We've only been at it for 41 years. So maybe we have a long time to go. But things seem to move at warp speed nowadays due to improved technology. Devaluation today doesn't require minting new coins and pushing them into circulation. All it requires today is the click of a mouse to increase the size of a TBTF bank's reserves with the Fed. So that means things can happen very quickly. Look at Iran's hyperinflation. After Congress imposed sanctions on them recently, it has happened with astonishing rapidity. However, the US is the reserve currency and we can kick the can down the road for a long time. So it could be a few more years yet.
Either way, I don't believe we'll get hyperinflation here. I think it will most likely take us to 70's style inflation...painful, but solvable with the right Fed Chairman in place. And given that we're likely headed down that path, the investment decisions become clearer to me. In this environment, stocks and Treasuries are a pure gamble, with the Fed's manipulation schemes going on. I thought I was safe in DBLTX and PTTRX, but now I'm not so sure. As the Fed bids the MBS in those mutual funds up to the sky, the yields are atrophying and the principal is looking bubbly. So I may have to pare back on those substantially in the coming months. The Fed strikes again. But where to put the cash to work next? The Fed is chasing us into risk-on securities, but given already bubblicious valuation, they are too risky and casino like.
John and I agree real estate (the actual land and buildings, not the securities on them) is the place to be. Productive land in particular. Gold may be a good place to be as well, although I wouldn't bet the farm on that one either, given that governments have a lot of sway in what happens in those markets. Cash might be appealing, except holding cash with no interest is guaranteed to lose money due to inflation, even moderate inflation. So I'm running out of ideas. |
