.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

Dear E.D.:

Judging by the investor profile you returned, I’d place 23 percent of your portfolio in Treasury Inflation Protected Securities. I believe that most portfolios are improperly managed if they do not contain TIPS. I would put 67 percent of your portfolio in the following sectors: utilities, foreign infrastructure, natural resources, growth and income, emerging markets, small caps, bonds, gold and Asia/Far East. Finally, I’d invest the remaining 10 percent in a short-term, intermediate bond fund.

I always recommend TIPS, because they are a guaranteed hedge against inflation, and I am inarguably convinced that within the next three to five years, we will have 10 percent to 11 percent inflation, as bad as or worse than the inflation of the 1980-1981 period. TIPS are guaranteed to increase in value with inflation; they are guaranteed to pay interest on the increased values; they are guaranteed to be instantly marketable; and their value is unquestionably guaranteed by the government.

And as certain as I am that the sun will rise in the morning, I’m certain that the Obama health-care plan will, in the coming dozen years, add trillions of dollars to the U.S. deficit. This enormous addition to the deficit can be the catalyst that may cause inflation of tsunami-like proportions. I would sooner trust a sociopath about the future cost of health care then the bloviations of a politician. For most senators and congressmen, spending our tax dollars is a sexual experience. It’s an addiction; it’s in their genetic code; their nerve synapses are wired differently; and they are unable to help themselves.

Most of us know that the real costs of this health-care bill will exceed projected costs by orders of magnitude. The costs of every government involvement (Social Security; Medicaid/Medicare; the wars in Vietnam, Iraq and Afghanistan; Fannie Mae; defense procurement; the Post Office; the war on poverty and so much more) exceeded congressional projections by enormous numbers. You know it, I know it and your congressman knows it. The future costs of this health-care bill will explode your tax bill, become a monkey on the back of the national debt and will become the genesis of a virulent inflation spiral.

The government could be printing trillions of dollars of new money, and this excess supply of dollars will lead to “demand-pull” inflation, simply defined as too much money chasing too few goods. The only way this huge debt (soon to be $11 trillion) will be repaid is for the government to inflate its way out of debt. Essentially, this debt will be paid back with newly printed, cheaper dollars. It’s happening now. The Chinese see this writing on the wall, and because they own $2 trillion of our debt, they have publicly expressed their very serious concerns. Meanwhile, China has been slowly off-loading the dollar into hard assets like gold, copper, oil, grains, etc.

My dad used to say, “Don’t ascribe short-term events to long-term consequences.” Inflation isn’t surging now, but don’t for a second believe that inflation will remain low in 2011, 2012 or 2013. Americans are so obsessed with the short term that we ignore long dangers.

That’s why I recommend TIPS. I suspect that when you’re ready to hang up your tools in 11 years, those TIPS could have at least doubled in value — remember to reinvest the interest. By 2020, you can cash in your $100,000 TIPS for $200,000 in new dollar chips and put that money to work at rates that I believe will be significantly higher.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2009 Creators.Com