{"id":12497,"date":"2015-05-25T11:57:28","date_gmt":"2015-05-25T15:57:28","guid":{"rendered":"http:\/\/www.pgm-blog.com\/?p=12497"},"modified":"2015-05-25T11:57:28","modified_gmt":"2015-05-25T15:57:28","slug":"are-investment-gurus-preparing-for-hyperinflation","status":"publish","type":"post","link":"https:\/\/www.pgmcapital.com\/nl\/are-investment-gurus-preparing-for-hyperinflation\/","title":{"rendered":"Are Investment Gurus preparing for Hyperinflation"},"content":{"rendered":"

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Dear\u00a0PGM Capital\u00a0<\/strong>Blog readers,<\/p>\n

In this weekend blog article we want to discuss with you the investment strategies of some world class investment gurus that might indicate that they are preparing themselves for a coming hyperinflation cycle.<\/p>\n

DEFINITION INVESTMENT GURU:<\/strong><\/span>
\nAn Investing Guru is someone who is considered an experts in their professional field of trade and Investing.<\/p>\n

Only a handful of people in this world can qualify as investment Gurus. We have carefully identified a number of investment Gurus based on their long-term track record.<\/p>\n

To qualify for our Guru Hall of Fame, an investor needs to meet at least three criteria:<\/p>\n

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  1. Long-term outstanding performance;<\/li>\n
  2. More than US$1 billion under management;<\/li>\n
  3. Low portfolio turnover.<\/li>\n<\/ol>\n

    Some of world’s well known investment gurus are:\u00a0George Soros<\/strong><\/a>, Carl Icahn<\/a><\/strong>, John Paulson<\/a><\/strong>, Marc Faber<\/a><\/strong>, Jim Rodgers<\/a><\/strong> and the legendary Warren Buffett<\/a><\/strong>.<\/p>\n

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    HYPERINFLATION:<\/strong><\/span>
    \nIn economics, hyperinflation<\/b> occurs when a country experiences very high and usually accelerating rates of inflation, rapidly eroding the real value of the local\u00a0currency, and causing the population to minimize their holdings of the local money.<\/p>\n

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    There are a number of theories on the causes of high and\/or hyper inflation. But nearly all hyperinflations have been caused by government budget deficits financed by money creation. After an analysis of 29 hyperinflations (following Cagan’s definition) Bernholz concludes that at least 25 of them have been caused in this way.<\/p>\n

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    A sharp decrease in real tax revenue coupled with a strong need to maintain the status quo, together with an inability or unwillingness to borrow, can lead a country into hyperinflation.<\/p>\n

    Hyperinflation effectively wipes out the purchasing power of private and public savings, distorts the economy in favor of the hoarding of real assets, causes the monetary base, whether specie or hard currency, to flee the country, and makes the afflicted area anathema to investment. But one of the most important characteristics of hyperinflation is the accelerating substitution of the inflating money by stable money, gold and silver.<\/p>\n

    BEST KNOWN EXAMPLE OF HYPERINFLATION:<\/strong><\/span>
    \nThe hyperinflation in the Weimar Republic, which is\u00a0<\/b>one of world’s best known hyperinflation,\u00a0<\/b>was a three-year period of hyperinflation in the\u00a0    Weimar Republic<\/a><\/strong> (modern-day Germany) between June 1921 and January 1924.<\/p>\n

    In this period the value of the ‘Reichs-Mark” depreciated from 90 Reichs-Mark in 1921, to 210,500,000,000 Reichs-Marks, by the end of November 1923.<\/p>\n

    In the same period the price of gold measured in Reichs-Mark appreciated from approx. 10 Reichs-Mark per Troy ounce to 1 Trillion Reichs-Mark by the end of 1923, as can be seen from below chart.<\/p>\n

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    PGM CAPITAL COMMENTS:
    \n<\/strong><\/span>In order to understand inflation we must think of the way ripples spread out when you drop a pebble in a pond. Inflation, moves in concentric circles from a small core of people to an ever widening group of affected individuals. The rich and powerful are in the inner circle and see the inflation first. This gives them time to prepare.<\/p>\n

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    Inflation moves in concentric circles<\/p><\/div>\n

    The working and middle class are in the outer circles and see the inflation last.
    \nThey are the victims of lost purchasing power.<\/strong><\/span><\/p>\n

    Due to the above it is important for us to analyse and\u00a0understand the investment strategies of the rich and investment gurus.<\/p>\n

    Warren Buffett:
    \n<\/strong>Here’s what Buffett’s been doing, which can be a sign that\u00a0he’s getting ready for high rates of inflation:
    \n<\/strong><\/p>\n