Inflation Protection VIC Plays

The mainstream media and the FED are focused on one thing these days, deflation. The FED is using all of its power to pump money into the economy to ward off deflation and reflate the economy. Deflation fears have presented the opportunity to buy inflation protection on the cheap.

There has been a good amount of recent VIC write-ups presenting inflation-protection ideas. The following three are the most recent ones:

Interest Rate Caps by humkae848

Gold Miners Index (GDX) by biv930

Short Treasuries (TBT) neo628

The TDBU blog has, since its start, been bearish on the stock market and bullish on gold. While we believe their are a great deal of bargains out there with large margins of safety, we do not believe that the whole market is spectacularly cheap. However, we are very bullish on gold, as we believe the Dow/Gold ratio should continue to fall back to its steady state around 5.

With the ratio at about 9, would could see gold jump to over $2000 an ounce. This is a similar conclusion reached by biv 930 in his GDX write up. To gain this inflation protection, we plan on adding the GDX index to our portfolio on monday, and making it around a 5% position.

Also, a great leading indicator that its time to buy inflation protection is below:

Fed's Yellen sees dynamics similar to Depression

Meanwhile, Yellen told reporters the Fed needed to fight back against the notion that its liquidity efforts would inevitably lead to higher inflation and higher interest rates, terming the notion "ludicrous."

UPDATE: 1700 shares of GDX were bought at $34.4