September 20, 2012

Forget About QE... I'm Worried About UC

Let's just be blunt here.

Inflation is back in a big way. It's not going to show up in the official numbers, but if you've paid for gas or food or healthcare recently, you've no doubt noticed that:

A)   Things are a lot more expensive

B)   You get way less bang for your buck (food packages are shrinking while prices remain the same)

This has been the case for some time now. However, the Fed's QE 3 program, combined with the ECB's OMT program, (both of which are "open ended" or "unlimited" in scope), have taken things to a whole new level.

Which is why we need to be concerned not with QE, but with UC: Unintended Consequences.

The Fed is largely composed of academics with little if any professional/ banking experience. These are people who use flawed data (case in point, the inflation measures in the US are a joke) to build models that they believe explain how reality works.

Setting aside the math and intelligence used to build these models, pure common sense begs the question, "how can someone who's never worked in the real world, build a model to explain reality?"

The simple fact is that they can't... which is why the Fed's policies have and will continue to unleash a slew of Unintended Consequences.

For instance, QE 2, which saw the Fed spending $600 billion, pushed food prices to record highs, kicking off a wave of riots and civil unrest throughout the Middle East.

So what will QE 3 bring?

The short answer is: nothing pretty. Gas and food prices were already high before the Fed announced QE 3. They will be going much higher in the future (Oil is currently falling based on Saudi Arabia working with the US Government to suppress prices).

Higher inflation means higher operating costs for corporations. Corporate managers (folks with real world experience) will adjust accordingly, most likely by firing people.

Which pushes unemployment even higher.

This is just one example of the slew of Unintended Consequences we're going to be facing as a result of the Fed's actions. I've detailed several more (all of them far worse than this) in my latest issue of Private Wealth Advisory, published just last night.

I've also detailed four special inflation investments designed the profit from the Fed's inflationary monetary policies. These are unique investments that will outperform even Gold and Silver as inflation takes off...

Case in point, two of them are up 8% and 10% this week alone. And I expect all of them to be much higher in the coming months.

To find out what they are... and take action to prepare yourself and your portfolio to face the coming Inflationary Storm, I highly recommend taking out a subscription to my Private Wealth Advisory newsletter.

To learn more about Private Wealth Advisory and find out more about our Special Inflation Portfolio comprised of extraordinary inflation hedges that 99% of investors don't even know about...

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Graham Summers