So… What are the Investment Implications?

A huge expansion of monetary policy and a devaluing of the US Dollar cause inflation. This does not happen overnight, but over the next several months and potentially years, after this financial crisis and monetary stimulus, the effects will be felt in the purchasing power of the dollar in every American’s hands. The cost of goods, commodities, all will rise as the US dollar is devalued. The cost of corn, coffee, cattle, livestock, lumber, sugar, etc, all will see price increases. These increases funnel down to the stores where we are paying more for the same basket of goods.

In this environment, we believe commodity prices, gold, Treasury Inflation protected securities (TIPS), and floating rate notes such as bank loans, all will do well. Some alternative investments such as infrastructure and real estate prices should appreciate in this environment. As always, inflation can go up and down regardless of what actual economic growth is doing in America or globally. We protect portfolios by putting together a diversified strategy that allocates to non and negatively correlated investments such as government bonds, investment grade corporate bonds, mortgage backed securities, and closed end bond funds. The core of our portfolios and investments stays steady, diversified and safe, but the pieces we add around these core holdings are specific, dynamic, and value added.