By Gary Gordon of etfexpert.com
With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.
-- Fed Chairman Ben Bernanke and voting members of the FOMC
I understand the reasoning behind the Fed's decision to leave interest rates at 0%-0.25% for an "extended" period of time. They hope to stabilize real estate prices, foster the flow of credit as well as tame unemployment. (They've got a whole lot on their plate!)
Still, is the FOMC turning a blind eye to the deterioration of the U.S. dollar. Are they unconcerned about foreign entities shying away from both the currency and U.S. government debt? How long will the Fed wait before it endeavors to preserve purchasing power, as opposed to allowing inflation to get ahead of the committee's projections?Just a few thoughts ... but I digress. In truth, I am more interested in the inflation-fighting ETFs. After all, the Fed has been battling deflation and downplaying inflation for so long, one wonders why these ETFs have shined so brilliantly in 2009. (They are They are the PowerShares Dollar Bearish (UDN), the iShares TIPS Bond Fund (TIPS), the Power Shares DB Total Commodities Index, the SPDR International Government Inflation Protected (WIF), the SPDR Gold Trust (GLD), the PowerShares DB Precious Metals (DBP) and the PowerShares DB Base Metals (DBB).) How impressive are these results? One could have held firm to a singular investing theme (i.e. guard against inflation), and one would have outperformed the S&P 500 with significantly less market risk. Ironically enough, the Fed has thought (and continues to think) that all's well on the inflation front. Perhaps that'll turn out to be true. However, if 2010 is anything like 2009, then investing in inflation-fighting ETFs will pay off handsomely ... regardless! If you'd like to learn more about ETF investing... then tune into "In the Money With Gary Gordon." You can listen to the show "LIVE", via podcast or on your iPod. At the time of publication, Gordon was long TIP, WIP, GLD and DBP. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.
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