Leonard Melman: Are You Prepared for Hyperinflation?
As looming inflation, currency wars and a possible run on gold threaten to derail markets, Leonard Melman, author of The Melman Report, is setting his sights on the midtier and near-term producers that he wants to scoop up when the blood is in the streets. In this interview with The Gold Report, Melman explains why gold, silver and the companies bringing them out of the ground could do very well in the second half of 2013.
The Gold Report: You recently told a crowd of investors at Prospectors & Developer Association of Canada (PDAC) that precious metals are the best place to invest in an inflationary period. Why is that?
Leonard Melman: When prices are going up, you wouldn’t want to be in housing stocks or auto financing, but you would certainly want to be in precious metals. You also might want to short the bond market. That is why you have to be aware of the direction of inflation. It is important to the concept of precious metals pricing. If you’ve been around for a few years, as I’ve been lucky enough to be, then you can easily recall a time when high inflation was the absolute key ingredient in massive previous bull markets. That is why I thoroughly look at what has led to past inflation and hyperinflation. I use four examples: the Roman Empire, the French Revolution in the late 1700s, the German hyperinflation in the 1920s and the recent catastrophe of hyperinflation in Zimbabwe. I examine whether America and other countries in the world are perhaps following the same paths that led to those previous hyperinflations.
TGR: Do you think investors are going to see hyperinflation in the foreseeable future?
LM: Not immediately. It’s like a doctor looking at a patient who is showing all the early signs of cancer, but the actual tumor hasn’t yet developed. It would be unwise to ignore those developing symptoms. That’s where I think we are. We don’t have hyperinflation yet, but many of the pathways that led to previous hyperinflations are present, and I think it would be very foolish to ignore them.