"You buy, obviously, precious metals" for protection, Sperandeo says
He traded for billionaire George Soros and hedge-fund star Leon Copperman during his 40 years in business, and his "Trader Vic" books are the stuff of legend. Victor Sperandeo has seen almost every kind of market, but he's now preparing for something rarely seen: hyperinflation.
How does an interest find protection from hyperinflation? "You buy, obviously, precious metals," Sperandeo tells CNBC in a July 19 interview. "And you don't need a lot. Because if it happens, it goes up in a huge fashion. So you only need a little bit."
Sperandeo lays out his case for hyperinflation by examining the numbers. "If you research history, there have been 30 occasions of hyperinflation," he says. "And by the way, let me preface this: I hope I'm wrong. You don't want to see this. But the point is, all the numbers that take place 100% of the time in the other 30 occasions are here."
Sperandeo says one sign of looming hyperinflation is a high percentage of borrowed money in a government's gross expenditures. "That presents a universal case where every single country that's had that has gone to hyperinflation. ... By the way, hyperinflation is the opposite of what you would think of as inflation. It's a run on the bank. It comes from deflation. It comes from not enough tax revenue from lower growth, and therefore bond buyers [walk away], and I'll bet you there's no one here that could say they would own a 30-year [Treasury] bond to maturity. ...
[Federal Reserve Chairman] "Ben [Bernanke] has said it's unsustainable. So everybody you talk to in government, especially if you talk to them on the side, will say it's unsustainable. The key is that it's really a fiscal issue. You've got to reduce spending and you've got to produce more growth."
However, the 4.4 percent net growth rate from 2012 to 2015 forecast by the government "ain't going to happen," he says. Therefore, federal deficits will continue to rise, and bond buyers will balk at buying more U.S. Treasury bonds. Unchecked money printing from the Fed will ensue, leading to hyperinflation, Sperandeo argues.
