INFLATION- THE BIGGEST WORRY

One of the biggest economic worries going forward is inflation. Simply put, the huge amount of cash that has been pumped into the economic system will chase all asset classes. And this includes commodities. Add to that, the economic recovery has meant the demand for basic commodities is recovering rapidly.

As per the International Energy Agency (IEA), global oil demand this year will reach the highest level since 2007. After falling for the last two years, consumption will be expected to rise to 86.3 m barrels per day. We are not surprised about predictions of higher crude oil demand. The lifestyle of the developed world is dependent on crude oil. And emerging nations are also on their way towards that lifestyle!

nvestors are keen to know where various economies are headed. The quality and substance of the economic recovery in major countries around the world is a much debated topic. And justifiably so! After all, the performance of one's investments depends on the same in a big way over the short term.

But there is one discerning investor who has carefully chosen an asset class that will perform well in either scenario. This class of assets, according to him, will perform well if economies recover, and will also perform well if they don't!

The asset class is commodities and the investor is none other than Jim Rogers. According to him, stock markets are up a lot in all emerging markets including India. Thus he is not investing in them currently, but is in fact just sitting and watching how things are panning out.

But Rogers' attitude towards commodities tells a different story. In his words, "The way I am playing is mainly with commodities because if the world gets better they will get better and if the world economy doesn't get better then most stock markets are going to suffer. It's not necessarily true of commodities, if the world economy does not get better. In fact if the world economy does not get better they are probably going to print even more money. Hence, commodities will be the place to be."

Pretty convincing argument, isn't it?

source:equitymaster