Inflation is on the rise. What can I use to hedge?

There is quite a choice:

• $PFIX (more about interest rate risk),
• $IVOL (more about being long credit but with crash protection),
• $INFL (mix of commodities, real assets & equities with pricing power).

Talking about inflation, inflation hedges like $BTU, $EQR, $SD, $SU even $CL1 have all been whacked today. One party of me wants to think that this is part of a coordinated reverse pump, coordinated by Klaus Schwab, but I just can’t see them coordinating action in so many markets.

Some very popular (in a pejorative sense) newsletters are now getting very fired up about inflation. The latest from HedgeEye is full of doom and gloom. I know that the establishment cannot even bear to think about thinking of the consequences of inflation on the (budget) deficit, but are they really playing big markets, like oil? It just seems unlikely.

Forward indicator suggests GDP is heading down

It’s probably all noise, but that’s what the NY Fed says.

DKNG — not entirely legit?

Unbeknownst to investors, DraftKings’ merger with SBTech also brings exposure to extensive dealings in black-market gaming, money laundering and organized crime.

Bulgaria is a hotbed of criminal activity. This sounds plausible.

Central bank balance sheets then and now

Chris Marsh with a historic and international overview of CB balance sheets.

I am not sure I understand all of this, but I understand some, and that part seems right and is extremely interesting.

It points out that the ECB cannot start to tighten, ever, because of Target 2 balances.

This thread argues that debt (not just debt purchased by the central bank) was growing unsustainably in China and that this will cause huge problems for the regime there. I don’t know enough about China to have an opinion, but clearly China has been addicted to debt-funded creation of vast quantities of physical capital, which it has combined with its seemingly bottomless supply of labour to produce annual growth of 6% for the last couple of decades. I guess it makes sense that this won’t go on for ever, especially with the demographic challenges that China faces.

Not all that is golden glisters

Golden Matrix is a carbon copy of management’s former penny stock, Elray Resources, which ran into issues with the SEC. While the company only has two actual employees, there is a catalog of SEC sanctioned individuals and firms that have been involved at Golden Matrix and Elray. The company’s operations are a complicated web of related party transactions which obfuscate an otherwise trivial business.

H/T The Bear Cave.

Safe Bulkers: a safe investment?

Nearly 8% yield in a growth industry.

Not investment advice.

Banks and billionaires

Maybe banks make a lot of profit from stock trades made by billionaires like Bezos. It’s interesting that banks are offering prime brokerage services to entities other than hedge funds. One thinks that people like Elon Musk would be the ideal customer for a bank like Credit Suisse.

Wrap

Commodities were massacred today. SPX was flat. NDX up 1%. Generally a deflationary day, presumably triggered by weak initial claims figures (i.e. higher than expected numbers filing for unemployment).

Finally

A big welcome to Michael, who has just signed up to this newsletter. You are number three of millions, my friend!