Investment advice during inflationary periods with high asset price inflation: Preserve value and realize best return by investing in the right asset classes during periods of uncontrolled inflation and economical instability.
Independent thesis Advanced level (degree of Master (One Year))Student thesis
For the past few years, the world has gone through a global financial crisis, and is still on a quite unstable road to a sustainable economic future. While the governments are trying to cope with a stable inflation rate, investors grow weary and are looking more into precious metals. That is why I investigate the government stimulation as well as the precious metal investment sector in this thesis. The thesis is divided in two important parts. The purpose of the first part was to determine the impact of the United States government intervention, by deliberate injection of new money, through Quantitative Easing - QE, into the monetary system and money supply, during periods of unstable economy in order to control the inflation rate. The second part of the thesis advises on an investment strategy in precious metals during times of high asset price inflation. Research and data collection was performed through a vast review of relevant literature within both traditional and opposing economical theories, principles, and beliefs, along with theories related to general market efficiency and shrewd investment. The research is based on collected quantitative data and mathematical statistical methods. The result and conclusions tell us that one can safely assume that government intervention through injecting money into the monetary system and increasing the money supply does support higher stock values, especially gold mining stocks. Some of the main findings of this thesis are: • A short explanation of different and often opposing economical theories that discuss the importance of money and inflation and how to prevent, through either deliberate control or not, an economical meltdown. • A short empirical investigation of how the monetary injection programs, by the Federal Reserve, such as Quantitative Easing, impacts the general market, represented by the S&P 500 index. • An important investment advice on how to invest during times when governments inflate prices and how the precious metals asset class, represented by the HUI index, are yielding higher profits while at the same time protecting investors wealth in an unstable economy.
Place, publisher, year, edition, pages
2011. , 46 p.
Federal Reserve, Fed, Inflation, Monetarism, Money, Milton Friedman, Ludwig von Mises, Irving Fisher, John Maynard Keynes, Ben Bernanke, S&P 500, SPX, Precious Metals, Gold, Silver, XAU, HUI, Gold Mining, Investment Strategy, Quantitative Easing, QE, Asset Price Inflation
IdentifiersURN: urn:nbn:se:bth-2349Local ID: oai:bth.se:arkivex685C24534843D8A0C12578C6005CD7B5OAI: oai:DiVA.org:bth-2349DiVA: diva2:829620
UppsokSocial and Behavioural Science, Law
Numminen, Dr. Emil