Betting on Inflation

Newkid1 · #1 (**permalink**) 10-06-08, 12:59 AM

Hi, I'm new here and to stocks. I need help finding a stock that does well during inflation.

With the bailout and the Fed going crazy on printing money, I want too cash in

jsssm · #2 (**permalink**) 10-06-08, 10:07 PM

Even though the fed is printing money, you have to realize that we are in deflation now. Oil is coming down, commodities are coming down. Check out the value of the dollar with symbol UUP UUP: Summary for PS DB USD IDX BL FD - Yahoo! Finance you can see that it is very strong. As the dollar goes up this is deflation (we can buy more with the dollar).

But, if you really want inflation protect, buy gold GLD or UDN which is bearish on the dollar.

Newkid1 · #3 (**permalink**) 10-07-08, 05:11 AM

Thanks for the hook up

The dollar being strong is probably temporary though, don't you think? This country has been running on debt and the time to pay for it is here I feel. The only way to keep the market going is to keep printing money to "unfreeze credit" or allow the country to go into a recession and naturally correct itself. But it doesn't seem like anyone is cheering for plan B so they will continue to throw money at the problem and cause the dollar to lose value for the next year or two.

jsssm · #4 (**permalink**) 10-07-08, 08:40 PM

Valid point. People are pointing to the dollar strength and rationalizing by saying that the US is stronger than other countries that are just beginning their corrections. But there are those that also point out that once things start to settle, we will be left with a bunch of cash which will then bring inflation back up. I would wait for the dollar to weaken/stabilize before doing anything about it. Also, gold (GLD) is a flight to quality, so it might actually hold even if the dollar goes up. If you want a leveraged play try DGP

Fredledingue · #5 (**permalink**) 10-08-08, 05:36 PM

No. Actualy there is deflation because most of the money stays in the banks coffers and is not circulating in the economy.
If the fed prints money, it will only add much needed dollars. Once banks start lending again, the Fed can remove the exeedent from the market to restabilize the dollar.
The only thing the fed needs to do is not renewing the loans they are doing, once banks start lending on a normal basis.
Don't forget that the fed so far lent money, it's very different than to print money to spend it rght away. Even the 700 bln plan and other bail outs are not "printing money".
They may print money to start but as poeple start paying their mortgage to the governement, the Treasury just take this money out of the market.

Newkid1 · #6 (**permalink**) 10-08-08, 06:20 PM

Well the way I'm seeing it is

debt = lack of money
printing money to pay debt = inflation

When banks unfreeze because of this "free" money floating around, it will simply keep the previous bubble going further instead of allowing the system to correct itself. No?

jsssm · #7 (**permalink**) 10-10-08, 06:23 PM

Quote:

Originally Posted by Newkid1

Well the way I'm seeing it is

debt = lack of money
printing money to pay debt = inflation

When banks unfreeze because of this "free" money floating around, it will simply keep the previous bubble going further instead of allowing the system to correct itself. No?

Yes. The plan is to take away all this money once the credit market unfreezes. Who knows how this will turn out or when it will resolve. Some people on cnbc are expecting crazy inflation very soon, but there is a good chance that the slowdown in the world economy can offset this. But if we have inflation and the economy does not grow, then we are in for some major pain.

Stagflation - Wikipedia, the free encyclopedia