There are a number of iron-clad reasons
inflation is likely headed higher and
the dollar is destined to move lower.
These separate but related macroeconomic
tidal forces can exert tremendous pull
on the market -- and they are both
tugging in the same direction. That's
why the environment is starting to look
conducive for Treasury
Inflation-Protected Securities (TIPS),
but which of these asset classes has
history shown to thrive even more under
these hostile conditions?
A.) AAA Corporate bonds
B.) Commodities
C.) Real estate
D.) Small-cap stocks
E.) Municipal bonds |
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Published: December 4, 2009
The
correct answer is
(B.) Commodities
There are several reasons a
depreciating dollar is a sure-fire
recipe for rising commodity prices.
The simplest is that goods
denominated in dollars, like
commodities, suddenly become cheaper
for foreign buyers. And when
inflation is on the rampage,
investors like the reassurance of
owning hard assets. Instead of
watching prices for things like
steel and gasoline rise all around
you, why not convert your dollars
into these commodities directly and
enjoy the ride?
Some illuminating stats demonstrate
this. When the Consumer Price Index
shot through the roof between May
1972 and December 1974, the S&P
Commodities Index more than tripled.
During the next decade, as
stagflation made life miserable for
equity and fixed income investors,
commodities posted a whopping
cumulative return of +479%.
Investors have a dizzying array of
options here, but the central idea
is that companies that bring us
these goods can deliver much "more
reliable" gains than the futures
pits. With that in mind,
StreetAuthority editor Nathan
Slaughter evaluated the commodities
universe as part of the weeks of
research and collaborative
discussion that went into
StreetAuthority's "Top 10 Stocks for
2010" list. Available in the latest
issue of the
Market Advisor newsletter,
this list is an invaluable resource
for self-directed investors who want
to earn above-average profits in the
equity markets. To get the full
list, and to learn more about
Market Advisor,
please visit this link.
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There are 7,932 banks in the United
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If you have cash in any of
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