How times have changed. It wasn’t many months ago that the entire financial world was singing the praises of inflation. The greatest fear among Wall Streeters and other financial lights was lower prices that might actually decline more and turn into that monster known as deflation. The thought conjured up nightmarish scenes of bread lines and bank runs.
Ever since the global financial crisis of 2008 and especially since the Covid pandemic, central banks and governments around the world have pulled out all stops to prevent such an occurrence. And guess what? It finally worked. After declining since the early 1980s, inflation has roared back to life, recently hitting 40-year highs.
But no one is celebrating. In fact, now central banks around the world have declared war on inflation, and Federal Reserve Chairman Jerome Powell is leading the charge. The Fed has dramatically raised the federal funds rate several times this year, with more action to come.
This week’s guest has long been an avowed enemy of inflation and an outspoken critic of the Fed’s inflation-boosting policies. How is he feeling now? He is financial thought leader James Grant, the Founder, and Editor of Grant’s Interest Rate Observer. Grant is also the author of 9 books. Several are financial histories, including the prize-winning The Forgotten Depression: 1921: The Crash That Cured Itself.
Grant will discuss the Fed’s about-face on inflation, the battle it faces to bring it under control, the implications for financial markets, and two investment ideas for this new investment era.
WEALTHTRACK Episode #1912 broadcast on September 16, 2022
Listen to the audio-only version here:
LEARN MORE…In his WEALTHTRACK interview and a recent issue of Grant’s Interest Rate Observer Jim Grant highlighted the small-cap equity fund Palm Valley Capital Fund (PVCMX) which holds mainly cash “awaiting the return of valuations at which an unbending, unconventional, uncompromising, value-seeking investor can put other people’s money to work”. Grant also recommended reading the firm’s quarterly letters to shareholders, “some of the best and wittiest financial-markets commentary on the web.” Here is a link to the firm’s most recent missive! .
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- Award-Winning Financial Journalist & Historian
- Founder & Editor, Grant’s Interest Rate Observer
INCORPORATE SOME INFLATION-HEDGING INVESTMENTS INTO YOUR PORTFOLIO
U.S. Treasury I Bonds
- Inflation-protected U.S. savings bonds
- 9.62% yield (through October 2022)
- Exempt from state & local taxes
- Yield adjusts to inflation every 6 months
- Buy online through TreasuryDirect.gov
TIPS (Treasury Inflation-Protected Securities)
- Principal adjusts for inflation
- Fewer restrictions but currently less attractive yields
Grant’s more speculative recommendation:
- Horizon Kinetics Inflation Beneficiaries ETF (INFL)
- Actively managed
- Launched 1/11/ 2021
- +10.83% annualized performance since inception (as of 6/30/2022)
ESSENTIAL PORTFOLIO ASSET
HOLD CASH IN A PORTFOLIO
- Provides financial flexibility
- Opportunity to invest in market declines
- Great gift of value in market panics
Tourmaline Oil Corp. TOU (Canada: Toronto)
FROM THE ARCHIVE
James Grant from the WEALTHTRACK Archives:
Award-winning financial historian James Grant is now working on his tenth book, immersing himself in monumental events of the 18th century, seen through the eyes of three key players who were also close friends.