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if you assume markets price inflation expectations efficiently, the answer is invest in just about anything with a market price or interest rate. Even bonds. B
by nerfhammer 8y ago
if you assume markets price inflation expectations efficiently, the answer is invest in just about anything with a market price or interest rate.
Even bonds. Bonds are just the price of money in the future. If the market expects inflation then bond prices will drop accordingly to match it. Just don't stuff money under your mattress or keep it all in a checking account.
- rmrm 8y agoI guess bonds, if inflation expectations are constant, as they will drop if expectations rise as you say. Avoiding bonds would be a mechanism to avoid rising expectations. So I think this is technically correct, if things are static, but does not protect against rising rates, which I guess it my question.
- nerfhammer 8y agoBonds are priced according to the market's best expectations of how much inflation there will be. If there is more inflation than the market expects than you will lose money. But, are you smarter than the market? Otherwise, if you only care about avoiding inflation just buy anything that is not a direct cash equivalent. Gold, iron, rocks, stocks, vespene gas, whatever.
- rmrm 8y agoInterest rates fell for what, 40 years, creating the great bond bull market? Things can tend to trend, not happen all at once and discretely. Maybe that means the market was horribly horribly wrong for 40 years, I dont know.