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Inflation Investments

Written By Luke Burgess

Posted October 24, 2009

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. 

A tsunami of money is headed your way.

It’s true.

But it might not be exactly what you have in mind. Here’s what I mean. . .

Just a few days ago, the U.S. government reported that the federal deficit officially hit an all-time record high for fiscal year 2009 ending in September — $1.42 trillion!

And even though it’s now over 10% of the nation’s GDP, the 2009 budget deficit is just small potatoes. Going forward, the Fed expects the budget deficit to dramatically increase to $9 trillion over the next decade.

Meanwhile, the U.S. national debt will cross $12 trillion as early as next week — about $40,000 for each citizen — and doesn’t include other future financial obligations, like Social Security and government-sponsored health care. Analysts estimate that these future obligations could cost the United States up to $100 trillion!

With an exploding budget deficit and thinning credit, the federal government will be forced to create a mountain of new U.S. dollars to help finance the country and repay debt.

Fortunately, there’s still some time before this strong inflationary period will start to have a negative effect on the dollar. And as investors, we can prepare and let inflation work for us rather than against us. More on that in just a second. . .


But first, in case you’ve missed any of the recent top stories from Wealth Daily and our companion publications, I’ve included them below.

Technical Trading Made Easy: 3 Tools You Can Use to Easily Spot Stock Trends
Wealth Daily Editor Ian Cooper makes it easy for investors to understand the three best technical indicators that have historically called tops and bottoms of stocks and major indices.

The Best Biotech Stock for 2010: Grandpa’s AMBER Alert Could Make You $1 Million
Wealth Daily Publisher Brian Hicks explains one strategy for picking stocks and reveals a huge milestone for his front runner in the biotech sector.

Smart Grid Stocks: The Trillion Dollar Transmission Horse
Energy & Capital Editor Nick Hodge discusses smart grid stocks and the coming $1 trillion investment that will send them higher.

The #1 Silver Stock for 2010: How to Get a 2nd Chance at a 7,667% Gain
Editor Luke Burgess unveils the most profitable silver stock in the past decade and tells investors about another company that Wall Street believes is in for similar gains.

The Best Way To Buy Gold: How To Get A Limited-time, Exclusive Discount on Gold Bullion
Wealth Daily‘s Greg McCoach explains how the biggest gold rush in world history could push prices over $5,000, and how to buy gold below spot prices right now.

Biotech Company Buyouts: How to Catch the Building Wave in Biotech Stocks
Editor Steve Christ takes a look at the big surge in biotech buyouts and what they mean for the pharmaceutical markets.

The Gusher Behind the "Montana Millionaires": One of the Largest Domestic Oil Finds Ever
Wealth Daily Publisher Brian Hicks discusses three brand-new investment opportunities positioned in what the U.S. Geological Survey calls the largest continuous oil formation it has ever assessed.


Wealth Daily Editor Adam Sharp reported from the Buttonwood Gathering in New York last weekend that legendary currency investor George Soros is still very bearish on the dollar. Adam’s coverage of the conference included Soros’s discussion of "a general flight from currencies."

The rest of the market is just as bearish. The value of the U.S. dollar (as measured by the U.S. dollar index), fell again this week by another 1%.

Reacting to the drop in the value of the U.S. dollar, commodities continued to rise this week. The iPath S&P GSCI Total Return Index ETN (NYSE: GSP), which follows a index of 19 commodities, gained almost 2% for the week — outperforming the Dow Jones, NASDAQ, and S&P 500.


Other broad-based commodity ETFs also did well this week:

  • Dow Jones-AIG Commodity Index Total Return ETN (NYSE: DJP) gained 1.7%
  • PowerShares DB Commodity Long ETN (NYSE: DPU) was up 9.6%
  • ProShares Ultra DJ-AIG Commodity ETF (NYSE: UCD) tacked on 2.2%

Commodities were led this week by precious metals and energy. In precious metals, gold and silver prices were only trading slightly below highs made the previous week. Meanwhile, both platinum and palladium prices reached 14-month highs this week.

In energy, crude oil was lifted to a high of $82 per barrel this week — a 12-month high. Heating oil and ethanol were also lifted to 12-month highs, while natural gas prices approached $5 per Mcf, over 100% higher than eight weeks ago.

Looking ahead, we can expect continued strength in commodities across the board, as long-term inflation pushes the dollar lower and lower. And I believe that the broad-based commodity ETFs mentioned above are easy and secure ways to hedge yourself against a falling U.S. dollar.

Good Investing,


Luke Burgess
Editor, Wealth Daily‘s Gold World
Investment Director, Hard Money Millionaire