The stock market has about doubled since the crash of 2008-09. But this rally won't last, and the crisis will continue to unfold. At least, that's the premise of "Debt, Deficits, and the Demise of the American Economy," written by Peter Tanous and CNBC journalist Jeff Cox.
In the book the two detail how debt will continue to weigh on the economy (regardless of the debt ceiling debate) and lead to another stock market crash in 2012 or sooner. The plunge in equities will be met with rising interest rates and inflation, according to their prediction.
Though it may not have happened yet, Tanous believes the Federal Reserve's strategy of buying Treasuries, "printing money" and "keeping interest rates at unreasonably low levels" will eventually manifest itself in a nasty case of inflation that will decimate the economy. "The outlook for inflation is dire," co-author Tanous tells Henry Blodget in the accompanying clip. "We are going to get much more severe inflation than we think."
To protect oneself from the impending inflation-driven doom, Tanous suggests the following three investments:
Treasury Inflation-Protection Securities (TIPS) - They might be boring and there's barely any yield, but they do offer protection if inflation does strike.
Gold - "Paper money will be worth less when inflation comes," says Tanous. As we've already seen over the last few years, as the dollar index loses value gold increases in value. He thinks the record highs recorded lately are just the beginning of this rally.
Oil - As bullish as he is on gold, Tanous thinks this commodity will be an even better investment, calling it "about the surest thing long-term that you can buy." He predicts the supply and demand will be "out of control" in the next few years.
- supply and demand
- rising interest rates
- stock market
- Henry Blodget