Expert: Steve Hach - 4/13/2011

Question
What are the best investments during periods of stagflation?
Thank you,

Bill Robinson

Answer
Hi Bill,

Thanks for the question.

It is important to remember that we don't have a lot of historical examples for stagflation--basically one in recent history.

In any case, typically recommend asset classes for periods of unemployment AND inflation are precious metals and real estate.

Housing is at real low valuations right now and may continue to slide.  So, buying some properties which can be financed at low rates and then rented would be a good thing.

In times of inflation gold is a popular play as well but here we find that the various precious metals aren't nearly as cheap as real estate since they have been on a big upswing for several years.

Please keep in mind that many analysts find that despite recent jumps in commodities prices and oil, it is very tough to have big inflation when housing is depressed, employment is down, and there is no real pressure on wages.

As always, the best investment strategy starts with paying off all of your high interest debt--credit cards, student loans and such.

Remember too that inflation is bad for creditors, but often good for those in debt since it reduces their burden.

Best,

Steve