Monty Pelerin makes some interesting observations about Gary Shilling’s investment advice, saying that it works when things are normal, but the global financial situation is anything but normal today. Indeed, I believe that the signs of hyperinflation are now here, and I’m not the only one. Even some of the mainstream papers are starting to see it (e.g., the Globe & Mail). Indeed, I have virtually no fear now that my portfolio is going to plunge like it did in 2008–I have the Bernanke put to count on. If asset prices go down, he’ll just monetize more debt and it’s back to races.
So I made this comment on Monty Pelerin’s article:
I follow a blog whose author likes Gary Shilling. His portfolio was static in 2009 and he didn’t bother telling us his returns in 2010. By contrast, our own portfolio is up high double digits (See DIY 2010 summary). Whose advice am I following? Jim Rogers, Marc Faber and Peter Schiff–long commodities, esp. gold and oil. This is an anti-inflationary portfolio and it is already up handsomely. I don’t think we have to wait for high inflation or even hyperinflation. I believe that hyperinflation is already here.
Look at the international situation. (BTW, I loved the video of Jim Grant that you recommended.) The Chinese and others who hold US treasuries are scared to death of the devaluation of the dollar, but they can’t dump them all at once or their hyperinflationary fears become instantly realized. So they are buying up assets, diversifying their holdings. Billions of Asia dollars have been sunk into the Canadian resource sector, while the Chinese have essentially ended their net purchases of US treasuries. So how does the Fed react to this? Buy, buying the debt, and monetizing (pun intended).
When the bubble finally hits the commodities market–and I don’t think there is a bubble yet by any stretch of the imagination since Americans can still afford gasoline and food–I think I will dump the commodities and purchase a farm. But until them, I’m still very long on Canadian resource companies, especially junior oils. The Chinese want what Canada’s got, and they are the most liquid players in town.
See also http://www.beatingtheindex.com/weekend-edition-expect-more-energy-deals-in-2011/