This Bout of Inflation Won’t End Any Time Soon
Emma’s Note: Despite the Fed’s reassurances, the inflation we’re seeing in the Main Street economy right now is not “transitory.”
Investors are looking for ways to get out of cash and into other assets to protect their hard-earned wealth.
Real estate, stocks, and collectibles are all seeing an inflow of money right now.
But so far, gold, the traditional inflation-hedge, hasn’t taken off.
That’s soon to change, says Casey Research editor Kris Sayce. And below, he outlines the best way to play the higher gold price and gold stock prices he sees coming.
The Federal Reserve may need to buy a new dictionary.
Or maybe the press and public should ask more questions when the Fed uses certain words.
Last month, you heard that the 5% inflation rate was “temporary” or “transitory.”
In other words, it wouldn’t last.
Many thought that meant the worst was already over… before the ink was even dry on the Bureau of Labor Statistics’ monthly CPI (Consumer Price Index) report.
One month later… and perhaps inflation isn’t as “temporary” or “transitory” as they thought.
Prices have gone up further.
We knew that would happen. You did, too.
Hot and Getting Hotter
As Reuters reported earlier this week, under the headline “US June CPI Comes in Hotter Than Expected”:
U.S. consumer prices rose by the most in 13 years in June amid supply constraints and a continued rebound in the costs of travel-related services from pandemic-depressed levels as the economic recovery gathered momentum.
The 5% for May was hot. And Reuters is right to say that June’s 5.4% was hotter.
The biggest increase in the CPI won’t come as a surprise. It’s for used cars and trucks. This has been one of the biggest stories of the past few months. Prices increased 45.2% over the past year.
According to the Bureau of Labor Statistics notes, it’s the largest ever one-year increase.
Granted, not everyone is in the market to buy a used car or truck. So you could argue that we should ignore that increase.
But what we can’t ignore are some of the other increases.
For instance, what about the 2.4% increase for food? Or the 4.9% increase in clothing? Or the 3.8% increase in electricity? Or the 15.6% increase in domestic gas services?
People have to eat… wear clothes… and keep themselves warm or cold – depending on the season.
Great Time to Buy These Lagging Assets
This bout of inflation isn’t going to end soon.
And despite the mainstream fears that the Federal Reserve will raise interest rates to combat higher inflation… we don’t see that happening either.
The Fed knows what happens when it increases rates – stocks fall.
The upshot of that is, we figure investors will continue to look for ways to get out of cash and into other assets.
We’ve already seen that happen in a big way. It’s one reason why property in states like Florida and Nevada is running red hot.
It’s why stocks are at or near record highs. And it’s why the collectibles market (for things like watches, baseball cards, fine art, etc.) is seeing huge money inflows.
The only two assets that seem like they’re not joining in are gold and cryptos. Both are down a lot from their record highs. Gold is down around 10%, and Bitcoin is down more than 50%.
But according to our Casey Research experts, that’s unlikely to last long. In fact, there’s a good case for allocating some of your cash reserves into these assets before the rebound happens.
The bitcoin trade is easy. You just buy it directly. Or you buy it through something like the Grayscale Bitcoin Trust (GBTC). It’s available to trade through most discount brokerage accounts.
As for the gold trade, there are several options. All of them have benefits. When it comes to gold, we prefer physical gold rather than a gold bullion ETF (exchange-traded fund).
And if you want leverage to the gold price as it rebounds, then buying gold stocks makes a lot of sense. As the gold price goes up, gold miners will go up, too… and should go up more, in percentage terms, than the gold price.
Then there’s the third option – gold stock warrants. In our view, this is the single best way to play both a higher gold price and high gold stock prices.
The Best Way to Exit the Inflation Problem
A warrant gives you the right, but not the obligation, to purchase a stock at a given price, for a given period of time.
With warrants, you get the benefit of leverage if gold and gold stocks go higher. Plus, because the returns for backing the right play can be so big, you only need to invest a small amount.
That means you can allocate the rest of your capital elsewhere. You could buy a safe, dividend-paying stock. Or maybe keep a little extra in cash (even though inflation is eating into its value).
But if you’re making bigger returns with the warrants plays, that will more than make up for any devaluation of your cash.
The question, as always with any niche investment like warrants, is “where do you get the best information and analysis on which warrants to buy?
The good news is that Casey Research expert, Dave Forest, has established what we can proudly say is the Number One service for finding the best investments in this market…
…with research and analysis so good, it resulted in one warrant play gaining 4,942%… another that gained 2,805%… and one current open position that is up more than 1,340%.
The bottom line is that as an investor, you must check out ideas like this. Staying in cash and hoping the bank’s interest rate will cover the “cost” of inflation is no longer an option.
If you haven’t yet checked out Dave’s latest research, do so now. Inflation is up, and the value of money is down. And by staying in cash, that problem will only get worse. Go here for the latest from Dave.
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He discovered financial newsletters in 2005 and headed up several, including Daily Reckoning, Revolutionary Tech Investor, and New Frontier Investor.
His biggest calls include telling investors to buy tech stocks in the early stages of the boom in 2013, and correctly predicting the Chinese stock market boom in 2014/2015.
Now, Kris writes the Casey Daily Dispatch, showing investors how to grow their wealth during the next stage of the economic cycle.
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