Fretting Inflation? Buy These Funds

OK, they're modest gains. But at least they're positive. Long-term investors in these funds have suffered plenty while they have waited for the return of hyperinflation.

The Rydex Inverse Government Long Bond Fund has lost about two-thirds of its value since it was launched in 1994. During the same period, Wall Street, as measured by the S&P 500, has trebled.

It's a wonder the fund still has $300 million in net assets.

Investors in ProFunds' Rising Rates Opportunity have lost 28% of their money since it was launched just five years ago.

The question: Are investors in these funds wrong, or were they just way too early? Is inflation pretty much licked, or is it due to come back in a big way?

Long-term thinkers talk about great so-called "Krondatieff waves" of inflation, which take 60 years.

Thirty-year government bond rates topped 15% in the early 1980s -- three times the current level.

Last summer, I sat down with Cathy Minehan, the veteran chairman of the Boston Federal Reserve, for an interview. At the end, I asked her if there were anything she thought the markets ought to be paying more attention to.

Her answer: underlying inflationary pressures. She argued that they had been slowly but steadily building in the economy for several years. Wall Street, she said, was too interested in the short-term, monthly numbers.