Investing in an inflating market

In a previous post I predicted that we would not be headed into another Great Depression, that there would be hopes for a recovery, and that the government would sacrifice the dollar to get out of this mess. It's looking like that prediction is coming true.

In another post I predicted that the market was at a bottom. I was a week early, but it was still a pretty decent prediction if I do say so myself.

I also put together a portfolio for this recovery that ended up returning 26.5% from Jan. 9 to today, while the S&P returned 20.3%. Again, not bad.

Will I quit my day job yet and become a Wall Street trader? Not quite yet. But I will make some new predictions.

I predict that with unemployment over 10%, Americans still struggling, and the shock of the financial crisis still on everyone's mind, the Fed will choose inflation over any threat of a recovery. All of the financial rags are predicting a resurgence of the dollar soon, but I predict over the next year a continuing decrease, and at some point the Fed will actually have to raise rates to keep inflation from getting crazy.

What does this mean for investing? Assets like commodities, gold, and energy should do well. Government bond prices should fall. All bonds will be under pressure from rising interest rates. Although Congress is looking at changing the health care industry, I still see this as a good long-term investment, as people are willing to spend more and more for their well-being. I also see a continued rebound in tech stocks and the NASDAQ.

At any rate, this is a good time to rebalance your portfolio. Here is my new BeeDub Index:

High-Yield Bonds (VWEHX): 5%

Intermediate-term Investment Grade Bonds (VFICX): 5%

2X Short Government Bonds (TBT): 5%

Emerging Markets (VEIEX): 5%

Health Care (VGHAX): 10%

S&P 500 Index (VFINX): 10%

NASDAQ 100 (QQQQ): 10%

International Stocks (VGTSX): 20%

US Small-Cap (NAESX): 10%

Gold (GLD): 5%

Energy (VGENX): 5%

Commodities (DBC): 5%

Real Estate (VGSIX): 5%

I'll keep these for the next 9-15 months before rebalancing. Let's see how this plays out!