Michael Aronstein’s Mainstay Marketfield fund is a new start on Wall Street, with $12.4 billion in inflows making it the most popular actively managed fund around. How do you bring in all that cash?
The only period that may be comparable to this is after the discovery of the New World, when all the Europeans looted all the gold and silver, new money out of the sky, a la the Bernanke Doctrine. You had, basically, a century of inflation in Europe. The tulip bubble didn’t come out of nowhere; that wasn’t just people’s appetite for flowers.
Two points. One this historical analysis makes no sense. The Federal Reserve can make monetary policy tighter if tighter monetary policy becomes appropriate. Mining-based monetary systems don’t have this feature. If sustained inflation occurs in 2014 or 2015 or 2016 or whenever that will necessarily be a result of future excessively loose monetary policy, not of anything Ben Bernanke did in 2012 or 2013.
More importantly, however wrong you think my analysis is, there is absolutely no reason to go out and invest in exotic mutual funds. The Treasury Department sells Treasury Inflation Protected Securities that guarantee you a real return by automatically adjusting the interest rate you earn for inflation. TIPS can be bought for cheap right now because most of the money in financial markets thinks inflation will stay low for years to come. Maybe you’re smarter than the market. If so, buy TIPS and laugh all the way to the bank. Don’t pay management fees to Michael Aronstein.