April 6, 2018

My recession hedge: Buying Gold Fields



The Swiss economist and investor guru Klaus Wellershoff has published an exciting book for self-investors. Obviously, he also preaches the cost problem and reminds his readers that the future is uncertain. But he also shares a few substantiated facts that each investor should know.

For instance, we know that interest rates can barely fall even more from today's levels. We also know that monetary expansion is inflationary in the long term. In Switzerland, the money supply was expanded significantly more than in the US or in the Euro area. We don’t know when it will come, but inflation is bound to hit Switzerland, too.

This will also bring down the exchange rates. And it will hurt stocks.

Does that mean you should refrain from buying them? Wellershoff tells his readers not to panic. We don’t know what the future will bring and that’s why it’s not sensible to stop investing in stocks.

However, what we can do is to be more careful. Obermatt CEO Dr. Stern has now been buying stocks for three investment seasons. This portfolio will suffer from the changes in interest rates and inflation.

Does that mean he should safeguard (that's also called "hedge") his assets – for instance with put options? No, because – again – we don’t know the future.

What he's doing now is building a portfolio of stocks that benefit from inflation. The first stock is Gold Fields, a South African gold company. He's buying 1300 shares from Gold Fields for a total of around USD 5,000.



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