vanguard money market funds rates
Last week, I was immersed in research for the July issue of sector ETF Trader when I took a moment to collect my thoughts. I turned my attention from my computer to television. As usual, he has been listening CNBC. I turned the volume and started listening to the Talking Heads.
And to my surprise, there was a coherent and articulate discussion on the mass monetary and inflation.
Report Kudlow economists. hosted two One is sure that we went to high inflation, while the other maintains inflation is not threatening at all.
These conflicting views make difficult decisions for investments in other words the smart money is least. hedge their portfolios against the ground by both sides of this argument.
That's what we need know.
Economist denounce inflation gave this simple example, "… if you have a very strong increase in the supply of apples the price of apples falls. "Implementation of this argument to the monetary base is increased the loss of money purchasing power of dollars which is inflationary.
The economist replied: "If people suddenly want to treasure and apples Suppliers Apple offer a lot of apples, you will not have a price inflation of the apple. " The argument is that banks are hoarding money instead of lending accumulation Money it. not increase the money circulating in the system, which is not inflationary.
Who is right?
Let's start with facts. The monetary base has grown from an open mouth 858 billion U.S. dollars in the last year. At the same time, the amount of reserves surplus in bank balance sheets has increased by 842 billion dollars.
Most of the money supply has increased seat sidelines. Although there does not cause inflation. But when banks start lending again to outward. Is a proverbial tinderbox.
The only way the Fed can keep inflation in the explosion is to reduce the money supply.
But here's problem. The Fed is caught between the hammer and place.  To drive the Federal Reserve to remove this excess money supply is expected to sell 800 billion dollars worth treasuries. And this, plus $ 3 billion + already on the hook to sell in 2009.
If the Fed turns an additional $ 800 billion in Treasury bonds, which will raise interest rates. This will be a blow to sacrifice economy. not see economic recovery to keep inflation under control.
So what does all this mean for your investment strategy?
The risks for high inflation in the next 3 to 5 years. But there is always the possibility that the Fed will remember their true purpose and to maintain the purchasing power of the dollar. If so, the economy World in May entered a prolonged period of little or no growth.
You can do some things now to hedge their portfolio against inflation and growth stagnated.
The oldest and the best way to protect against inflation gold. If you already have some, yet is come buy. Remember, you're not investing in gold to get rich, you are trying to avoid bankruptcy. ETF SPDR Gold Shares (GLD) offers an easy way to add gold to your portfolio.
The guarantee against trickier. stagnant growth is just my opinion non-cyclical companies pay a dividend of Nice is the best way go. In particular, I like the utilities because of their regular income and dividend payments.
There are a number of different ETF focused on utilities sector. Vanguard Utilities ETF (VPU) is a good choice. VPU has a small (even by the standards of the ETF) expense ratio of 0.25% while the payment of a dividend under 4.52%.
The debate on inflation will on. In a perfect world, economic growth returned, and that the Fed will pull the money supply goes well, we have therefore high rates of inflation. But I'm willing to go to hedge your portfolio broke. cons now a recovery less than perfect economic.
Corey Williams is the co-editor of the Dynamic Wealth Report, a free investment newsletter that offers investment ideas and news you can’t get from the mainstream investment press. Corey and his team bring decades of Wall Street and Silicon Valley experience to help you discover profitable trading ideas you can use today.
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