Capitalizing on Higher Interest and Inflation Rates

[Culture]

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?

[TickTock]

Short-sell bonds.

[brewer12345]

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.

[FinanceDude]

Quote:

Originally Posted by Culture 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%..........

[FinanceDude]

Quote:

Originally Posted by brewer12345 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!!

[FinanceDude]

Quote:

Originally Posted by brewer12345 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??

[Art G]

Hold cash and load up on non callable 15% tax free muni bonds, when they appear.

[brewer12345]

Quote:

Originally Posted by FinanceDude 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.