What is the Best Investment In Times of Inflation?

Pinnacle Digest writes: In Daniel Amerman’s latest article he explains the great game that is being played by the financial heavyweights of the world. He explains what the best investment has proven to be in times of inflation.

 Amerman explains that these heavyweights of the global financial system are playing a game at the very highest level of our financial system. The strategy of the game has two halves according to Amerman: “going long the real, and short the symbol.” He continues “That is, going long real assets by owning them, and going short the dollar and the financial system by selective and advantageous borrowing. That way if you are a hedge fund manager, CEO or "private equity" investor who has essentially gambled the world monetary system on your speculations, and you collapse the financial markets and the value of the dollar when you guess wrong - you don't jump out the office window. Instead, you enjoy an extraordinarily lucrative early retirement.”

If the dollar drops in value (which it surely will) it essentially pays off part of any debts the heavyweights have borrowed. You see, it’s in the best interest of the heavyweights to see the dollar collapse as they are often highly leveraged. 

Amerman explains: 

“As an example, a financial "heavyweight" borrows $1 billion to buy $1 billion in real assets. If asset inflation in real terms occurs and the asset climbs to $1.5 billion, he can then sell the asset, pay off the $1 billion loan, and walk away with half a billion.”

And if the dollar completely collapses in value, well then that financial heavyweight makes even more. Perhaps he makes 2 or $3 billion. 

Amerman asks his readers what their response is to such behavior. Do they clam up and get mad that this is allowed to happen? Do they take their money and hide it under a mattress? Or do they accept the fact that these manipulative practices are out of their control and do they make hay while the sun is still shining?

Amerman encourages the latter.

Amerman states “That "personal profit" part likely sounds pretty good. But, if we personally don't have the millions and billions to directly access the capital markets and play the Great Game - how can we participate in the profits? To find an answer, we are going to travel back in time, re-examine an old children's story, and explore the little-known key to how millions of households successfully turned inflation into net worth. The time we will travel back to is the last time inflation raged out of control in the United States, when the dollar lost 57% of its value between 1972 and 1982.”

Amerman uses three examples for what investors can do in an inflationary scenario such as 1972 to 1982 (a time period that in its beginning looked a lot like today). He explains how if you had put $18,000 into a Dow index fund in 1972, you would have lost a fortune over the next ten inflationary years. consider this: in 1972 the Dow was at 929. In 1982 the Dow was at 812. So that $18,000 invested in 1972 would be worth $16,000 in 1982. But that’s not where it ends. Adjust that for inflation and the numbers get real scary. Given that those ten years saw vicious and unforgiving inflation, somewhere in the range of nearly 9% annually, that $18,000 would really be worth (inflation adjusted) about $7,000!

Amerman explains that “By 1982, after ten years of inflation, the dollar was only worth 43 cents in terms of 1972 dollars.” 

The next example Amerman uses is putting the $18,000 into a house. Had you bought an $18,000 home in 1972, by 1982 it would be worth $41,000. A nice investment you would think - but think again. Adjust for inflation during that period, of nearly 9% annually, and the value of the home in 1972 dollars is only $17,500 (by 1982)!

Click here to read the third and most profitable option that paid 120% over the ten year period in inflation adjusted profits. Take a guess what the investment was.