The superior choice of asset class will presumptively be US stocks with a high beta to inflation and demonstrating robust earnings in steady growth economic cycles. The conventional thinking about equities and inflation is to purchase commodity stocks, REITS and infrastructure plays. In times of creeping inflation those plays could underperform because: (a) growth might be very moderate(GDP of 2.0% to 3.5%) but high enough to push out of mere dividend yielding stocks; (b) the US rates curve is still organically coming off historical lows (separate from inflation pressures); (c) global trade continues to excel and is higher than past inflation analogues so that the likes of China and Europe may continue to export (to the US) deflationary pressures and moderate homegrown inflation expectations; and, (d) monetary policy is shifting from accommodation at the Fed and Bank of England to aggressive policies by the ECB and Bank of Japan. All of the above argue for the fact that stocks selected for creeping inflation should be more than mere inflation hedges.
Basic materials is the primary sector for long positions to take advantage of creeping inflation. These are companies that produce “things” that are needed to drive the economy, transport those things, and package and wholesale those things. They are chemical companies such as LyondellBasell Industries (ticker: LYB), Monsanto MON -0.01% Company (ticker: MON), E.I. du Pont (ticker: DD). They are also companies such as International Paper IP +0.83% (ticker: IP), Alcoa AA +0.81% (ticker: AA) and Nucor Corporation (ticker: NUE). In addition, exposure to copper via Freeport-McMoRan (ticker: FCX) and Southern Copper (ticker: SCCO) can be added for good measure. The secondary sector for long positions is large cap US healthcare stocks such as Pfizer (ticker: PFE), Johnson & Johnson (ticker: JNJ), Becton, Dickinson and Co. (ticker: BDX) and UnitedHealth Group (ticker: UNH). Obviously, these particular companies are listed only to illustrate the types of companies more likely to benefit from creeping inflation.
Friday, July 4, 2014
Smart Equities For Creeping US Inflation
In the EPJ Daily Alert I am aggressively warning that price inflation is likley to accelerate in the near future, Are you prepared? Jeremy Hill writes at Forbes:
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ReplyDeleteConsidering the copper rehypothecation issues in China do you think long in physical non-ReHyp copper is safe? Safe-ish?
Jeremy Hill of Forbes writes Smart Equities For Creeping US Inflation. Basic materials is the primary sector for long positions to take advantage of creeping inflation.
ReplyDeleteBut such thinking fails to perceive that inflationism in fiat wealth is over through and done.
Global debt deflation is introducing destructionism of every form. Deleveraging out of currency carry trades and derisking out of debt trades is going to literally destroy fiat wealth.
The chart pattern in two of his recommendations show completion. LyondellBasell Industries NV, LYB, a popular currency carry trade, manifested a massive dark cloud covering candlestick; and International Paper, IP, a popular debt trade, manifested a blow off market top candlestick
One could commence a short selling investment strategy, and use these Inverse Market ETFs as the basis of collateral, as a huge number of short selling opportunities exist, such as Manufactured Home Builder, CVCO, Tool Manufacturer, MKTAY, and Property Manager, Z, all of which are at their market peak.
The best investment strategy is one designed for the failure of credit and the death of currencies.
Short Side of Long posts June Sentiment Report Hedge Funds Have Been Covering Their Short Bets On PMs. Technically speaking, PMs sector still remains in a downtrend and have to overcome quite a few resistance levels before a bull market is to return.
My take is that those covering their shorts will capitulate, as Equity Investments, VT, Nation Investment, and Small Cap Nation Investment, EFA, Global Financial Institutions, IXG, and Yield Bearing Investments, such as DTN, trade lower, and that an investment demand for gold, GLD, commenced on June 21, 2014, as a wild bout of purchasing of Gold Mining Stocks, GDX, drove Spot Gold, $GOLD, from $1,275 to $1,315.
I expect the US Dollar, $USD, UUP, to trade higher for a brief period of time as Sovereign Currencies trade lower for a while, and thus for Spot Gold, $GOLD, to trade lower to $1,285, before it soars ever higher on the failure of Credit, AGG, and the death of Currencies, DBV, CEW, that is on the death of fiat money. Gold is in the middle of an Elliott Wave 3 Up, that is in the middle of the most sweeping of all economic waves, specifically the one which creates the bulk of the wealth on its way up to an Elliott Wave 5 High.
The trade lower in the price of gold, if it does occur, makes for an excellent buying opportunity, as in a bull market one buys into price dips, just as in a bear market, one sells into pips.
In understanding the value of gold, it is helpful to understand its relationship to empire. Robert Ramsey posts Hidden Secrets of Money II, The 7 Stages of Empire. One of the hidden secrets of money is that each empire goes through 7 stages.
I recommend that one start to dollar cost average an investment in the physical possession of gold bullion; it can be held
•in audited vaults, and spread around the world for safety, and covered by an insurance policy.
•in physical Internet Trading Platforms, such as GoldMoney or BullionVault, and sold as needed.
•in the Merk GOLD TRUST, the deliverable Gold ETF (OUNZ). It’s an ETF with the option to take physical delivery of gold.