Inflation

Profit From Inflation: These Six Stocks That Will Add Punch to Your Portfolio

If there's one skill you need to learn, it's how to profit from inflation.

Thanks to the cheap-money policies of Team Bernanke at the U.S. Federal Reserve, the escalating levels of global sovereign debt, and other recent developments in the world economy, it's clear that we're headed for a period of steeply rising prices - inflation. If you know how to navigate this tricky stretch, you'll be fine. But those who don't are going to really feel the squeeze.

Learning how to profit from inflation is actually an easier assignment than you might expect. First, you have to invest in certain classes of stocks that have historically performed exceptionally well when inflation has raged across the land. And, second, you will enjoy maximum profits if you invest in those stocks before inflation really takes hold.

Let me use six specific stocks as examples to show you what I mean.

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What the Looming Inflation Tsunami Means for the U.S. Housing Market and Commodities

A few weeks ago, Money Morning Contributing Editor Martin Hutchinson warned readers about the looming inflation tsunami threatening the United States.

Easy money policies like those of the U.S. Federal Reserve and other central banks have helped raise prices in emerging markets, as well as the United States, and sent the commodities sector surging.

"[W]e can expect inflation to be with us for several years, too," said Hutchinson. "In fact, expect it to get worse for the next three to four years, while Ben S. Bernanke remains at the helm of the nation's central bank."

As inflation threatens to eat away at the value of stocks and bonds and cut into investors' returns, Hutchinson said one of the best investments to make ahead of rising prices actually is a house.

The housing market is at or near its bottom and rates on 30-year mortgages are desirable for buyers. Investors who find the right neighborhood, strike a good deal and don't financially overextend themselves could find a sound housing investment as the best store for their money.

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Core Inflation Numbers Will Allow the Fed to Stay the Course – For Now

Even though the cost of living in the United States jumped higher in December, the way the government calculates inflation will give the U.S. Federal Reserve enough cover to maintain its loose money policy.

The consumer price index (CPI) rose 0.5% in December, the largest increase in 18 months, the Labor Department reported Friday. About 80% of the increase was due to an 8.5% rise in the gasoline index, also the sharpest increase in 18 months. Food prices rose by 0.1% in December.

The CPI is the broadest of three monthly price gauges from the Labor Department, because it includes goods and services. Almost 60% of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

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U.S. Inflation Set to Soar as the Country's Chief Export Boomerangs Back Home

While prices for food and energy have been rising, inflation in the United States has remained relatively subdued.

One common explanation for that phenomenon is that U.S. inflation has been "exported" to China and elsewhere through the U.S. Federal Reserve's monetary policy. And given the perennial U.S. balance of payments deficit, it's good to know the country has found something it can successfully export!

However, the bad news here is that inflation does not stay exported - and in 2011 it may boomerang back to make life on Main Street miserable.

Thankfully, there are precautions we can take to combat higher prices and preserve our wealth.



To find out what you can do to protect yourself from surging inflation, read on...

Buy, Sell or Hold: Brace for Inflation with Kraft Foods Inc. (NYSE: KFT)

Growing up in the 1970s, I remember seeing fears of food inflation affect the life around me.

My parents purchased a small farm and put in an

organic garden so that we would always have food. My mom was always canning food and my father was riding the tractor. They had grown up in the 1930s and remembered the key to surviving tough economic times was to be able to feed yourself when you needed to.

Today, we have a generation of fast food buyers. But the problem with that diet - besides its impact on your health - is that it is not as cheap as it once was. People will have to change their spending habits if they're going to cope with inflation.

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Question of the Week: U.S. Consumers Squeezed by Inflation, Worry About Middle Class Pinch

The U.S. Federal Reserve has made one thing very clear: It views deflation as public enemy No. 1, and it will do everything in its power to keep that ruinous downward spiral in prices from taking hold.

But is the U.S. central bank focused on the wrong threat? And if that's the case, are U.S. policymakers setting the stage for a consumer-crippling inflation spike?

While the Fed has announced more quantitative easing to pump more money into the U.S. economy - hoping that would encourage lending and spending - a cadre of cash-strapped consumers is worried the stimulus measures will actually ignite long-term inflation.

There is a precedent: The current policy is similar to one taken in 2003 - 2004, when the Fed kept rates near a record low and inflation rose faster than initially predicted.

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Fed's "QE2" Could Fuel Inflation in U.S. & Deflation in Europe

The U. S. Federal Reserve's latest round of quantitative easing (QE2) may further escalate the currency war by producing a crippling bout of deflation in Europe and conversely, another period of inflation on the domestic front.

The diverse results are possible because further Fed purchases of debt are likely to re-ignite economic growth and increase prices in the United States, while a surging Euro will make it more difficult for European countries to pay off debt.

Fed purchases of Treasuries to stimulate the U.S. economy could send the euro rising against the dollar, sparking deflation in Europe, Nobel Prize-winning economist Robert Mundell told Bloomberg News.

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Is the U.S. Federal Reserve Setting the Stage for Hyperinflation?

The U.S. government wants to stimulate growth in the moribund economy by stoking the fires of inflation. But by leaving interest rates low and buying up bonds - a policy known as quantitative easing (QE) - the U.S. Federal Reserve risks debasing the dollar, which could lead to a prolonged period of hyperinflation that would send prices skyrocketing.

After their most recent meeting on Sept. 21, Fed policymakers said low inflation warranted looser monetary policy. Minutes from the meeting said central bankers were prepared to ease policy to boost inflation expectations "before long."

The Fed is seeking ways to boost the U.S. economy after keeping interest rates at record lows and buying in $1.7 trillion of U.S. securities. The next move may be another round of quantitative easing that would expand the Fed's balance sheet even further.

But as it feeds more and more money into the financial system, the central bank may very well be sowing the seeds of hyperinflation.

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Federal Reserve Policy Pushes the Dollar Ever Closer to Collapse

Much of the content of the latest U.S. Federal Reserve statement, released on Sept. 21, echoes the central bank's previous post-credit-crunch pronouncements: There is still too much slack in the economy, interest rates are still going to be near-zero for an "extended period," and the Fed will continue to use payments from its Treasury purchases to buy yet more Treasuries.

But this recent statement uses a new turn of phrase that should have Americans very upset. The Fed says "measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate." Though the wording treads lightly, it should not be taken lightly. It may signal the final push toward dollar collapse.

The Fed's dual mandate, since an amendment in 1977, has been to promote "price stability" and "maximum employment." While often discussed as if both goals are complementary facets of one mandate, they tend to have been at odds during every recession since the Great Depression.

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Question of the Week: U.S. Federal Reserve Keeping Low Rates Does More Harm Than Good

After their meeting last week, U.S. Federal Reserve policymakers said they are more worried about deflation than inflation and vowed to look for ways to help along an economy that is experiencing worrisomely slow growth.

In fact, the central bank's rate-setting Federal Open Market Committee (FOMC) said it plans to keep the benchmark Federal Funds rate at its record-low level unchanged between 0.00% and 0.25% for the 20th consecutive month. And, using its go-to line - central bank policymakers said rates could remain that low for "an extended period."

In the near term, that appears justified. Core inflation is running at only 0.9%, below the Fed's comfort-level target of 1% to 2% - where it says the inflation rate needs to be for price stability. Fed Funds futures at the Chicago Board of Trade (CBOT) now show that traders believe there is a 54% chance the Fed won't increase short-term rates until its November 2011 policymaking meeting.

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Exchange-Rate Risk: The Unseen Enemy of U.S. Investors

When specialty-chemicals-maker H.B. Fuller Co. (NYSE: FUL) announced its third-quarter results earlier this month - with earnings and revenue coming in well below expectations - company shareholders suffered an 8% haircut in a single day.

Rising raw material costs appeared to be the headline reason for turbulence at the company. But there was another culprit - a frequent flier in cases of earnings shortfalls, but one that often remains unseen and misunderstood.

I'm talking about exchange-rate risk.

U.S. investors don't realize it yet, but the level of exposure to exchange-rate fluctuations facing big American companies - as well as those based overseas - is steadily increasing. So what happened to H.B. Fuller - and its shareholders - is going to occur with increasing frequency. And in many cases, the fallout will be much more severe.

To better understand the rising exchange-rate risks facing U.S. investors, please read on...

Currency Exchange Rates and Your Investments: What You Don't Know Can Hurt You

You may be facing immense foreign-currency risks in your investment portfolio - and not even realize it.

If that's the case, don't feel bad: You're not alone.

The reality is that most American investors have no idea that currency exchange rates directly affect U.S. corporate earnings, this country's stock market, or the growth rate of our economy.

The bottom line: These investors don't realize that they face some pretty major foreign-exchange-rate exposure in their investment portfolios - as well as with the individual stocks contained in those portfolios.

This exchange-rate exposure can be accompanied by some pretty major risks. Understanding how currency fluctuations can enhance or destroy corporate earnings, the export sector and the U.S. economy, and even your personal wealth will make you a smarter, better investor.

To understand how the currency markets are determining the fate of our economy, please read on...

We Want to Hear From You: Should the U.S. Federal Reserve Keep Interest Rates Low?

After their meeting yesterday (Tuesday), U.S. Federal Reserve policymakers said they are more worried about deflation than inflation and vowed to look for ways to help along an economy that is experiencing worrisomely slow growth.

In fact, the central bank's rate-setting Federal Open Market Committee (FOMC) said it plans to keep the benchmark Federal Funds rate at its record-low level unchanged between 0.00% and 0.25% for the 20th consecutive month. And, central bank policymakers said rates could remain that low for "an extended period."

In the near term, that appears justified. Core inflation is running at just 0.9%, below the Fed's comfort-level target of 1% to 2% - where it says the inflation rate needs to be for price stability. Fed Funds futures at the Chicago Board of Trade (CBOT) now show that traders believe there is a 54% chance the Fed won't increase short-term rates until its November 2011 policymaking meeting.

In the interim, faced with a still-wheezing economy, the central bank may even start buying back large blocks of U.S. Treasury bonds - a technique that pushes liquidity out where its needed.

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Five Ways to Profit as Coffee Prices Soar

If you're anything like me, you can't resist stopping in for a "cup of Joe" every morning. If so, you're probably also like me in that you're experiencing a bit of pain in the wallet right now, given the steady increase in coffee prices we've see over the last year (and especially in the last few months).

If you want physical proof that we're operating in a truly global economy these days, just look at how these three factors have creamed your coffee budget:

  • Lousy weather in Latin America is threatening a big chunk of the worldwide coffee crop.
  • U.S. coffee stockpiles are reportedly at a 10-year low.
  • And Vietnam and Brazil - two of the world's Top 3 exporters - are scheming to hoard their stockpiles.
Little wonder coffee prices are at 13-year highs, and coffee futures have zoomed 44% since June.
Expect the trend to continue.

This may be bad news for your pocketbook - but it's great news for your portfolio. Coffee prices are going to rocket another 30% from here.

And with the strategy we're about to show you, this run-up in prices will be truly good 'til the last drop.

To learn more about how to profit from the global bull run in coffee, please read on...


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