The Treasury Is Punch-Drunk On Stimulus

We’ve all heard that the stock market always looks forward, never back.

You can see the proof. Just take a look at companies that recently announced great earnings, but still hedged their bets on future guidance.

The reason is that the market wants to know what’s going to happen in the future. It couldn’t care less about what’s already in the bank. Right now, the markets know one thing for sure: The U.S. Treasury is printing money and dumping it into the financial system at historically unprecedented rates in an effort to stimulate the economy.

Chances are good that the Fed won’t know when to stop the printing presses. Its thought process goes something like, "If some stimulation is good, more will be even better." And most politicians, who are always looking ahead to the next election, won’t want to risk their futures by cutting off ANY economic aid prematurely.

But continuing to print money only exacerbates the inflation problem and deepens the hole. For example, the ratio of the U.S. budget deficit to GDP is at the highest level since World War II.

The real problem, though, is that all this economic over-stimulation sets us up for inflation. It’s something every investor should guard against. And it’s why we’ve got the best four investments for you to limit inflation’s impact.

#1: Gold - The Tried-And-Tested Inflation Hedge

These days, many think of gold as a great investment for its safety and growth. And solely based on the amount of direct-mail advertisements I get from gold bugs, you’d think it was the only investment worth keeping.

But it’s actually an effective hedge against a declining U.S. dollar and an inflationary economy. It’s why every investor should have some exposure to gold in his or her portfolio. As part of our Asset Allocation Model, we recommend 5%.

For all its benefits, there are currently two problems with the physical metal. Because it’s in great demand, it’s hard to get. Consequently, purchasing it requires a stiff premium - in some cases, a premium of 10% or more - when and if you do find bullion or coins to invest in.

A much better way is to pick up a few shares of SPDR Gold Trust ETF (NYSE:GLD), which seeks to replicate the price performance of gold bullion. Shares of GLD trade at the ratio of 10 shares to one ounce of gold.

This investment trust holds the physical metal for investors in vaults: You can see what that looks like here.