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Capitalizing on Higher Interest and Inflation Rates
Old 02-10-2008, 09:27 PM   #1
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Capitalizing on Higher Interest and Inflation Rates

I am firmly convinced that interest rates along with inflation are going to rise precipitously in the next few years (say 3-5 years). I mean inflation in the range of 6-8% and interest rates of 9-11% I see this lasting 5-8 years. Ignoring whether or not I am right, what would be the best way to take advantage of this? The only thing I can think of is taking out a very large loan and buying a very $2M house in River Oaks (The nicest neighborhood in Houston). What else is out there that has a lower carrying cost without concerns for the liquidity trap?
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Old 02-10-2008, 09:29 PM   #2
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Short-sell bonds.
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Old 02-11-2008, 07:58 AM   #3
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Easy trading vehicle for you: RYJUX. This is an inverse long govt bond fund that puts the exposure on via futures contracts.

I'd also have a heavy commodity/commodity producer bias in your portfolio.
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Old 02-11-2008, 10:10 AM   #4
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I am firmly convinced that interest rates along with inflation are going to rise precipitously in the next few years (say 3-5 years). I mean inflation in the range of 6-8% and interest rates of 9-11% I see this lasting 5-8 years. Ignoring whether or not I am right, what would be the best way to take advantage of this? The only thing I can think of is taking out a very large loan and buying a very $2M house in River Oaks (The nicest neighborhood in Houston). What else is out there that has a lower carrying cost without concerns for the liquidity trap?
Boy, aren't we the "Doom and Gloom" squad......... Bottom line, the govt/Fed will NOT allow inflation to hit those high numbers........

I don't see any Paul Volker days coming back........everybody loved their 11% CDs until they found out their car loan was 19% and their mortgage rate was 15%..........
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Old 02-11-2008, 10:11 AM   #5
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Easy trading vehicle for you: RYJUX. This is an inverse long govt bond fund that puts the exposure on via futures contracts.

I'd also have a heavy commodity/commodity producer bias in your portfolio.
Managed Futures!!
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Old 02-11-2008, 10:13 AM   #6
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Easy trading vehicle for you: RYJUX. This is an inverse long govt bond fund that puts the exposure on via futures contracts.
The ER is 4.97%, is that right??
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Old 02-11-2008, 10:24 AM   #7
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Hold cash and load up on non callable 15% tax free muni bonds, when they appear.
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Old 02-11-2008, 10:25 AM   #8
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The ER is 4.97%, is that right??
I think the ER is whacky on that thing because some of the costs of the futures trading activity gets reflected strangely. Remember, if you short a bond you have to pay the coupons.

Its similar to the way expense ratios sometimes look funny on CEFs that are levered: the interest cost of the leverage gets caught up in the expense ratio.

But I should say that I think making this kind of bet is not for the faint of heart, and should probably not be done by the typical investor.
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