Is Inflation Beginning? Are You Ready?

Saturday, March 23, 2019
By Paul Martin

by EconomicPrism’s MN Gordon
Sat, 03/23/2019

Extrapolating The Recent Past Can Be Hazardous To Your Wealth
“Those who cannot remember the past are condemned to repeat it,” remarked George Santayana over 100 years ago. These words, as strung together in this sequence, certainly sound good. But how to render them to actionable advice is less certain.

George Santayana – purveyor of eminently quotable wise words by the wagon-load, but what shall one do with them in practice? [PT]

Aren’t some facets of the past – like the floppy disk – not worth remembering? And aren’t others – like a first taste of romance – worth repeating… if only it were possible?

Where investing is concerned, remembering the past – and discerning what to make of it – can actually be a handicap. Where does the past begin? How does it influence the future? How does one invest one’s capital accordingly?

These are today’s questions. What follows, with purpose and intent, is an attempt to scratch out an answer. Where to begin?

Many investment gurus in the early 1980s were predicting the future while projecting the past. After a decade of raging price inflation, the popular dogma was to pack one’s portfolio with gold coins, fine art, and antiques. This was the proven, surefire way to preserve hard earned wealth.

The United States, remember, was just a year or two away from going full Weimar Republic circa 1921-23. The dollar was going to quickly turn to hyper-inflationary ash, like conifer trees in a California wildfire. Everyone just knew it. You could darn near count down the days.

Right On The Money
Conventional wisdom, when it comes to the economy, markets, and investing, eventually leads to trouble. While everyone is busy watching the status quo unfold with Swiss watch like precision, the conditions that first brought this state of affairs to fruition subtly changes. Yet almost no one takes notice.

In the late 1970s, A. Gary Shilling had a hunch. Rather than the consensus view that inflation would persist forever, Shilling suspected that the U.S. was entering a long-term era of lower and lower rates of price inflation – and an equally long-term decline in interest rates. Under this backdrop, traditional inflation hedges would be disastrous.

Shilling, having conviction and wanting to warn investors, wrote a book about his insight. The book was first published in the early 1980s, and its title asked two significant questions: Is Inflation Ending? Are You Ready?

The book’s sales were an utter flop. No one, save a handful of shrewd individuals, could actually fathom that price inflation was dissipating. But the book’s forecast was right on the money.

The Rest…HERE

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