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Todays Best Investment Ideas
Inflation 'elephant' stomps on bonds
Tuesday, April 22, 2008

 "Bonds are waking up to reality; the inflation elephant has gotten so big, they can't ignore it anymore," says Martin Weiss. In his Safe Money Report he picks an inverse bond ETF .

"Look around you. You can see inflation everywhere.  The price of wheat is up 94.5% in the past year.  The price of corn is up 65.7%.  Oil? Up 80.7%.  Gold? Up 37%.  Rice has gotten so expensive; we're seeing horrendous food riots break out from one side of the globe to the other.

"Meanwhile, the government's own inflation numbers have gone from bad ... to worse ... to horrendous.  The Consumer Price Index was up 4% from a year earlier in April. The Producer Price Index jumped 6.9%.

"Long-term interest rates must start rising as a result.  But until recently, they have not been. Investors were willing to buy long-term bonds — even when they yielded less than inflation — because they were considered a safe 'hiding place' during the credit crisis.

"Now, they're starting to sell their bonds. The long bond futures (which track the price of Treasuries with maturities of 15 years or more) just suffered a critical technical breakdown — exactly the event we were waiting for to signal a major turning point in this all-important market.

"Our recommendation: Take action now to protect yourself and aim for a substantial profit. Buy the Rydex Inverse Government Long Bond Strategy (RYJUX) Fund at the market.

"This fund, formerly known as Rydex Juno, is designed to rise 10% for every 10% decline in the price of the longest-term government bonds (currently, the 30-year bond). 

"In other words, the fund is designed to hand you a profit if long-term bond prices fall — and interest rates, which move in the opposite direction of prices, rise.  That's exactly what we expect to happen in the weeks and months ahead.

"Rydex requires a minimum investment of $25,000 if you invest directly through the firm. But its products are offered with much lower minimums throughl many brokerage firms." 

 

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