With all the recent Fed actions, is there any one who here believes that inflation will not go out of hand in the near future? While I don’t think that we will see double digit interest rates, I do expect rates to trend higher (8-9%) within a few years.

I recently came across this blog post that shows a historical chart of the Fed Funds Effective Rate between 1954 and 2008. Paul Volcker, the Fed President at that time had to raise interest rate all the way to 20% to fight off inflation. But that drove the economy into a deep recession.

I recommend reading The Bear Facts for a look back at the early 80’s.

As an investor you would naturally ask how do we tackle inflation? What is the best way to invest in the inflationary environment?

This article posted on Global Economic Trend blog gives some ideas

# In hyperinflation the last place one wants to be is in cash.
# Commodities in general are a standout.
# Gold is a standout.
# Precious metals are a standout.
# Property is a winner.
# Equities are a winner.
# Treasuries are distinct losers if not an outright short.
# Foreign currencies
# Energy

I recommend investors to consider the following stock investments

1) Vanguard Precious Metals and Mining (VGPMX)
It’s down 66% from peak. I think this is a great safe way to play precious metals. The fund recently added Newmont Mining (NYSE:NEM).

2) Double Gold Long (DGP)
DGP has been performing well recently since Fed’s announcement of backing Mortgage treasury bonds.

Also while you are there, take a look at this article.
Gold railles to near $960 an ounce on Fed’s announcement.

3) U.S Oil Fund (USO)
As Oil continues to perform well, USO is a great fund to be in. Fed’s recent action not only helped Gold, but also Oil and other commodities.

Posted: 03|19|09 at 10:46 pm. Filed under: Economy, Economy Statistics, Financial Statistics, Trading Strategy, Energy, Financial Press, Finance. Pinging is currently disabled.