According to Nancy Davis, Founder and Managing Partner of Quadratic Capital Management, gold and oil are not ideal investments for inflation hedgers.
“The Fed has not lost its credibility in the eyes of investors”
Kriptokoin.com As you can see from the news, the Fed received criticism on the grounds that it intervened late in rising inflation. and its reliability was questioned. However, Nancy Davis says the Fed has not lost its credibility with investors:
I know there are plenty of critics who say the Fed is unreliable, and I’m not one of them. I think the Fed is doing the best it can with the tools it has. I think it is prudent to use the balance sheet more as a tool to fight inflation. It looks like they will use this in addition to their walking policy rates.
Is there a problem in CPI calculation?
Nancy Davis also states that the Consumer Price Index is not the only way to calculate inflation:
The biggest problem I see with CPI alone is that one-third of the index, about 33 percent ‘ what they call ‘housing’ and in fact this is the rent used by the owner. Year-on-year rent increases are around 1.5%, while home ownership prices are approaching 20%.
Don’t gold and commodities protect from inflation?
Nancy Davis’ company, Quadratic Capital, has a fixed income IVOL ETF that provides protection against inflation. According to Davis, “85% of the portfolio” consists of Treasury Inflation-Protected Securities (TIPS). “But then we’re just trying to fix the existing problems with TIPS,” says Nancy Davis, noting that they’re actually trying to make a profit when long-term yields rise, which is likely to happen in a stagflationist or inflationary environment.
According to Nancy Davis, whenever you hold options, you experience long-term volatility in the underlying asset class. Davis adds that real assets such as energy and gold are not the best inflation hedges, detailing as follows:
Personally, you know, energy and gold and all these real assets may not be the best inflation hedges because coupons are not the best inflation hedges. they don’t pay. Therefore, there is no monthly income. However, there are transportation costs. Gold is not an inflation hedge, I think it’s a currency transaction. No yield, no return.
