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From Lumber To TIPS To Bitcoin: 12 Inflation-Hedging Investment Moves

In the past year:

—house prices have gone up 12%.

—lumber prices have tripled.

—shares of mediocre companies like The New York Times, American Water Works and Duke Energy have climbed to 40 times trailing earnings or more.

Dollars, it seems, aren’t going as far as they used to in the acquisition of hard assets, real estate or business assets. This is not surprising, given how many of those dollars are being manufactured at the Federal Reserve.

The Fed conjures up new money as it expands its collection of Treasury bonds. Its balance sheet has ballooned by $3.4 trillion since the start of last year. The official word for this process is “stimulus.”

Is there any risk that asset inflation could turn into wage inflation and generalized price inflation? That this process could feed on itself? The ministers at the Fed say there is nothing to worry about. Why, the Consumer Price Index is up only 2.6% from a year ago, and even that jump, they say, is a transitory phenomenon. We’re just bouncing off the depressed commodity prices seen early in the pandemic.

Maybe. But maybe that CPI jump was not transitory at all. The Economic Cycle Research Institute, a private consulting service, publishes what it calls a Future Inflation Gauge. (The monitor is calculated from an undisclosed mix of factors that probably include job growth and industrial prices.) The FIG, at 95 in September, has recently shot up to 130. What that means, explains ECRI co-founder Lakshman Achuthan, is that the inflation rate is likely to trend up, not turn back down, over the next six months.

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