Press Release Summary: Despite the Federal Reserve\'s cut in interest rates two weeks ago, many investors remain worried about inflation and are taking steps to mitigate the risks it might pose to their portfolios.
Press Release Body: Appia Capital's George Bakoyannis stated that "Inflation risk is much underrated," and remains, more of a problem than is being discussed." While still low by historical standards, inflation is starting to creep up. Through August, inflation as measured by the consumer price index was 3.7%. An uptick in the remaining three months could push it past 4% for the first time since 1991. It is highly likely that the last three months of the year will show higher prices than the comparable period a year before, because prices actually declined in September and October 2006, and were flat in November of that year, according to the Bureau of Labor Statistics, which compiles the data. That is an occurrence few expect to see again this autumn.
So investors are now looking for safe havens. "In this environment, inflation-sensitive instruments like [Treasury inflation-protected securities] and commodities are a great place to be," Mr. Bakoyannis stated.
Mr. Bakoyannis has upped his stake in just these types of investments.
A higher inflationary environment favors commodities because typically reserves in the ground are likely to maintain their value in a period where inflation erodes the value of the dollar. Another area that usually holds up well against inflation is real estate. But as anyone trying to sell a home can attest, real estate is not up to the task this year.
The National Association of Realtors projects that existing-home prices will be down 8.6% in 2007. So commodities have emerged as this year\'s most popular inflation hedge, experts say. They also have benefited from unabated demand from such emerging markets as China\'s.
2022
