Jens Parsson said that anyone who tried to profit from an inflationary event was a fool, and the only thing to do was to attempt to stem the blood and make it out alive. Once upon a time the best haven accessible to all might have been the S&P500 index as a claim on the real value of the largest companies in the land, but with the popularisation of indexing and current asset prices I'm not so sure this will provide much protection, let alone profit.
In my mind, perhaps the best option to profit from current circumstances is to short 20+ year US Treasuries. This way, if the Treasury continues to print money, the long term bonds will decline in value, as their real value will fall. Further, if the central bank decides to increase rates, the long term bonds will also decline in value, as they will pay out less compared to short term bonds. So you win in both instances.
The problem is both how and when. Options would offer the greatest profits, but they are hard to access and need to be monitored and renewed regularly, incurring losses in the interim. There are funds that return the inverse of long term bond indexes, but these will lose money over time unless the index falls, all else being equal.
In terms of preserving capital, then, this option is fraught; you put in too much too early, and you end up losing money and miss the eventual gain. You put in too little too late, and you miss the gain. However, if you add regularly to the position you should eventually end up with a profit, so it would work as a trade.
But how do you secure the rest of your capital?
I'm new to SI and I hope I've done this correctly. |
