A few recent articles have caught my eye about the potential for inflation to spike up in the next few years, as a result of the financial bailouts.
We think inflation could become out of control in 3 to 5 years. Yet, we might not wait for that position. Hence, perhaps early, we have a large inflation hedge. We don’t own gold as a commodity. We won’t disclose our inflation hedge, yet with enough work, you can find true inflation hedges.
And this comment from International Value Advisers’ Charles de Vaulx in the latest issue of Value Investors Insight
Do you still have an affinity for gold?
CDV: Yes. As governments throw significant amounts of money at the economic crisis, that will eventually push inflation higher. We want to have some gold in our portfolio – it’s now a 4.5% position, virtually all in bullion – as that happens. There’s a saying that you should not confuse a clear vision with a short distance. We’re willing to own gold even though it may not act as a hedge in the near future, because we have a fairly clear vision about what will happen to inflation three, four or five years out, and it’s not a pretty sight.