by KYW's Salil Gutt
The Federal government is throwing enormous sums to reduce the impact of this punishing recession. The government directly or indirectly is on the hook for $8 trillion. That's a lot of trillions it does not have but is going to borrow on your behalf, the taxpayer.
Right now everyone is focused on creating jobs and getting the country back on track and it will happen. The danger comes later when all of those trillions remain on the books. So, what is being presented as deflationary today could end up being inflationary down the road. Some bond market pros are positioning investments as though inflation is inevitable.
The timing of this is uncertain but may occur when investors and foreign governments balk at the low interest rates offered when the Fed goes to borrow. When the interest rate cycle turns to the upside is the time of reckoning. The playbook from the early 1980's now needs to be read. At that time stocks were out of favor and investors fled to the safety of quality bonds, CDs and treasuries with maturities no longer than five years. An investment like TIPS, Treasury Inflation Protected securities could be a high flying investment.
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