We had technological difficulties in Maine, however, and couldn’t get the satellite hookup going in time.
Even so, I thought it might be interesting to share the portfolio we were going to discuss. It brings up both an important as well as an interesting topic.
According to Wikipedia, “Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes. It is the opposite of disinflation. It can refer to an economic policy whereby a government uses fiscal or monetary stimulus in order to expand a country’s output.”
Reflation is not necessarily good or bad, of course. The response from the Fed, the Treasury and Congress over the past few quarters probably saved us from a more crushing recession/potential depression.
But the challenging part comes next. Can the Federal Reserve and the Treasury drain money out of the system just right so that they don’t: 1) stunt the recovery; and 2) create runaway inflation?
Color me skeptical. It seems like the “thread-the-needle” or “goldilocks” scenario is the least likely outcome. Far more likely is that political pressure (and natural optimism) will force the government to leave its foot on the pedal for too long, goosing the economy into an artificially strong recovery … with a payoff coming through a substantial uptick in inflation down the road.
With that in mind, CNBC asked me to pull together a list of seven or eight ETFs that stand to benefit from reflationary trends. Here’s what I came up with:
|Vanguard Emerging Markets||VWO||20%|
|Vanguard FTSE All-World Ex-US Small Cap||VSS||10%|
|iShares Global Materials||MXI||10%|
|iShares MSCI Brazil||EWZ||5%|
|SPDR China ETF||GSC||5%|
|SPDR Gold Shares||GLD||20%|
|Fixed Income and Currency (30%)|
|SPDR International TIPS||WIP||20%|
|WisdomTree Dreyfus Emerging Market Currencies||CEW||10%|