Deficits pose a triple threat to investor portfolios.
It’s been years since investors lost sleep over inflation.
But almost overnight — in the wake of
Hurricane Katrina, the run-up in oil prices, and
staggering U.S. budget and trade deficits — it seems the
I-word is turning up in practically every financial news report.
Yes, inflation is news again. But not to everyone. Many
knowledgeable insiders saw the inflation storm clouds forming months
and even
years ago.
Alan Greenspan did. That’s why the Federal Reserve chairman recently voted to raise interest rates for the 11th consecutive time, despite the possibility that U.S. economic growth could stall in Katrina’s and now Wilma’s aftermath.
Warren Buffett did. That’s why the legendary investor has been pouring billions into foreign
currency. “In 2002, we entered the foreign currency
market for the first time in my life,” Buffett told Berkshire Hathaway
shareholders in last year’s annual report, “and in 2003 we enlarged our position as
I became
increasingly
bearish on the dollar.”
Economists and Wall Street insiders did. That’s one
reason why stock market
averages have stalled in recent months as savvy investors began shifting away from dollar-based paper assets and into tangible assets.
Blanchard and Company, Inc. also saw the inflation stormclouds forming. Since 2002, America’s largest and most respected precious metals dealer has been signaling an emerging bull market in gold, the preferred hedge against inflation.
