Galt Stock

Independent Investment Research for IRA’s and 401K’s

Dec 7, 2008

I have written before about the danger of inflation and the importance of having some protection in gold and silver.  I also have warned about the danger of bonds and treasuries.  Many present signs are actually pointing to deflation.  This is occurring because of the destruction of balance sheets on real estate holdings, asset backed securities, commodities and equities.  The dollar has gained over 20% against many other currencies, due to fallout from the world-wide economic slow down.  The Fed is printing money, the Treasury is throwing it at banks, and the congress is quizzing a never-ending string of industries that want to tap the taxpayer for help in these tough times.

Every recession has been followed by inflation.  It is a direct result of the “priming of the pump” that goes on to try change the natural occurrences of boom and bust.  Since September, the Federal Reserve has expanded the money supply over $11 billion dollars a day.  Carnegie Mellon University economist Allan Meltzer in a recent interview with Forbes, stated that “people who say deflation is a threat are either rumormongers or ignorant”.  Added Meltzer, “They need to take a refresher course in economics.” 

While I still believe gold and silver (and other commodities) will pay handsomely in the near future, you may want to look at Treasury Inflation Protected Securities.  A popular option is iShares Lehman TIPS Bond (TIP).  You can buy shares in this fund through your brokerage account.  They will increase in price to match inflation-adjusted securities.  TIP is currently paying 8.2%.

WARNING:    The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it’s your money.  If you lose it, it’s your responsibility, not ours or your grandmothers!  The editor may or u amay not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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