Hedge your bets now for inflation ahead

Economist Brian Beaulieu spoke to a combined meeting of my three TEC groups recently. The title of his presentation was, "Recovery: 2011 and Beyond."

Beaulieu attracts a fair amount of attention within the TEC community, in light of his accurate prediction that a significant recession would befall us in 2008. He started telling TEC groups about the impending problem in 2003. He also advised our members what they should be doing about it in advance.

With certain caveats, Beaulieu’s presentation was much more optimistic. 2011 will be a good year. 2012 and 2013, as well. 2014 could be another problem. But it was the "what to do about it" part that was the most interesting.

Beaulieu is predicting inflation. Long-term, steady and prolonged – 5 to 6 percent range inflation. Others are now becoming increasingly concerned about the prospects of inflation. Beaulieu has been talking about it for several years. OK. What to do about it?

Beaulieu advised our TEC members that now was the time to buy assets, productive assets and real property. He told members to borrow money at the current remarkably low (by historical standards) rates. He said to lock in as much long-term money as possible.

He told our TEC members "Borrow as much money as you can now. Borrow so much money that you can’t sleep at night. Then, borrow more – enough so your spouse can’t sleep either."

One of my members who heard Beaulieu a couple of years earlier had been keeping track of a $2 million property that was in foreclosure. The day after the Beaulieu session, my member’s real estate broker called him to say the property was going up for auction at a sheriff’s sale the following morning.

There were two bidders at the sheriff’s auction. The other guy dropped out after the opening bid. Much to his surprise… and the amazement of his wife…my member bought the property at a totally ridiculous discount from the original asking price.

Was Beaulieu right in his inflation forecast? Only time will tell. In the meantime, my member and his wife should have many sleepless nights in their new home. Good for them.

One hint: How much gold would you have to own to keep you awake at night?

Dennis Ellmaurer is a principal of Globe National Corp., a Milwaukee firm working exclusively with sellers of small businesses in southeastern Wisconsin. Ellmaurer also is a chairman of The Executive Committee (TEC), facilitating three CEO groups in southeastern Wisconsin. He can be reached at dennis@globenational.com.

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