I see a lot of articles warning of inflation and there are no signs of the printing press slowing down anytime soon. Are there any Gold or precious metal ETF worth considering as a hedge ?
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The latest Planet Money episode “Bond Voyage” (at least I think that was the one) taught me that printing money does not necessarily lead to inflation. Higher interest rates and the expectation of higher interest rates – two different things that feed into each other – lead to inflation. At this time there appears to be no expectation of higher interest rates in the near future, and investors keep buying our debt at very low interest, so as long as they keep doing that and keep expecting low rates, the rates will stay low, as will inflation. That’s my takeaway anyway.
Rates are not low because legitimate investors are buying our debt. Rates are low because the Federal Reserve is manipulating the market by printing money and buying up all kinds of bonds ranging from treasuries, mortgage-backed securities, municipal bonds, and corporate debt.
Aren’t there better inflation hedges, that might pay dividends while waiting?
Interest rates will indeed stay low as long as the whole world wants to buy US Treasuries, i.e, as long as people of the world trust the US of A more than, say, the People’s Republic of China.
So the “Inflation” will be mostly in asset prices. Stocks up 50%, suburban real estate up 20%, many commodities including lumber up 25-50% in the last year. Everything goes up except interest rates - this will screw up the textbook definition of inflation.
Maybe dividend paying commodity linked firms? Or some high yield debt that is less sensitive to rising rates due to both the higher yield and the shorter duration?
I don’t claim any special insight into these macro factors aside from that it suddenly became popular to talk about inflation in the main stream financial press as of a week or so ago. From this alone, I would guess most of the move is already over in the obvious targets.
I remember around 2009 or so there were lots of dire warnings and fear about how it was inevitable that all the government money printing and borrowing woudl cause steep inflation.
Gold got pumped up for a while then as a solution by the gold bugs.
Then it all passed without any noticable inflation and the gold bugs shut up for a few years while gold gradually lost most of its value.
That boils down to inflation didn’t happen last time, therefore it will never happen. A lot of people are complacent in this market.
If anything inflation is a self fullfilling prophecy because politicans think they can spend endless sums of money and just have the federal reserve print it up. They are overconfident and think there are no consequences, so they are bound to keep doing it until it blows up.
I well remember the high inflation of the 1970s and early 1980s. It was like being in a storm with no way out.
Problem is that Paul Volcker passed away in 2019. We have nobody around now who would have his kind of guts, the kind it took finally to extinguish that earlier inflationary firestorm.
If (when) inflation flares up now we are going to be in a world of hurt.
by guts do you mean increasing interest rates to XX%? Except now Fed. debt levels are much higher so that’ll never happen.
Monetary and fiscal policy in bed together. I wish I could supervise my supervisor…
Gold did not lose most of its value. It lost some but not all of it. I continue to be long gold and strategically add to my position.
True, I overstated it. It did drop around 40% in around 5 years from '10 to '15 while the stock market nearly doubled.
the metal or ETF? I’m debating whether to get in on other precious metals which have industrial use like SLV etc
are there any commodity ETFs that pay dividends, and ideally no K1s?
That’s really cherrypicking though since it had a huge run up before 2010. Gold has outperformed the S&P 500 since 2000. The start\end years matter a lot.
Gold also should not be viewed as an investment comparable to the S&P 500. It is a currency that is an alternative to holding US dollars that will lose value every year.
There are broad based commodity ETFs but you would be hard pressed to find one which paid dividends. Here’s one: https://graniteshares.com/institutional/us/en-us/etfs/comb
And buying when the gold bugs are pumping it up is not the right time.
And sadly, I can’t find one publicly traded company that makes CAT-theft deterrents.