“… vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out.”Economist Robert Wenzel in a speech at the New York Federal Reserve Bank, April 2012
Mr. Wenzel was right and today we know: vast amounts of money are now being printed.
M2 money supply is probably the most important early indicator of inflation. For two years since the start of the Covid 19 pandemic, annual M2 supply growth has averaged almost 20%, far higher even than during the inflationary 1970s!
Inflation is the single greatest macroeconomic risk facing investors. Since 1960, more than two thirds of the world’s market economies experienced episodes of high inflation. On average, investors lost 53% of purchasing power during such episodes. In many cases losses of wealth were significantly higher.
Empirical evidence has shown that exposure to commodity futures represents far and away the best hedge against inflation. For example, in the paper titled, “Assessing Managed Futures as an Inflation Hedge Within a Multi-Asset Framework,” published in the Journal of Wealth Management (April 2011), the authors concluded that, “Managed futures outperform the other asset classes… No other asset class presents itself as a viable inflation hedge.”
Their finding corroborated an earlier Alliance Bernstein’s research which found that “managed futures” (i.e. exposure to commodity futures prices) had the highest inflation beta of all asset classes:
This may stand to reason all the more because commodity prices have remained depressed over the recent years. Particularly relative to equities, commodity prices have declined to an all-time low, an extreme market anomaly in the context of last 50 years.
A mere reversion toward that norm may present not only an inflation hedge but also an attractive investment opportunity in its own right as well as a valuable, real means of diversification just when this is most needed. This reversion has begun in 2021 and adding exposure to commodities like energy, metals and key agricultural commodities could be among the most compelling investment alternatives for the decade of 2020s.
To read a simple explanation of the 3-step process of constructing this type of a portfolio, please consult the following PDF document. It’s not complicated.
We’ve done this before and outperformed world’s leading, Blue Chip managed futures funds!
Managing broadly diversified portfolios across 50 or more futures markets is exactly what the I-System was built for and where our audited track record stood out, head-and-shoulders above most of our peers.
From 2007 to 2013 we managed under Galstar Derivatives Trading and the stellar track record we achieved is a live (and audited) testimony to the quality and reliability with which we can offer this service.
This result was not a lucky fluke: it was based on trading in 39 financial and commodities markets using 120 I-System strategies and about 10,000 individual trades. The results are also repeatable, given that they were entirely based on a set of precisely defined and thoroughly tested rules defining exactly which risks were taken, how much risk and how that risk was managed.
For further information about our Inflation Hedging portfolio solutions please consult the PDF brochure below which shows how we construct a managed futures portfolio. For additional details you may contact us by writing to TrendCompass@ISystem-TF.com
 Stanley Fischer, “Modern Hyper- and High Inflations,” National Bureau of Economic Research Working Paper No. 8930