Seth Klarman Bullish About Gold, Concerned About Runaway Inflation

Some prominent hedge fund managers are concerned about runaway inflation. Jim Rogers has been criticizing the Fed’s monetary policy for a while. “I don’t know what’s going to happen to the world economy. I know if the economy gets better, I’m going to make money in commodities. If it doesn’t get better, I’m going to make money in commodities because they’re going to print money, print huge amounts of money,” Rogers said recently.

Ray Dalio, owner of the world’s biggest hedge fund, expects the US dollar to depreciate and emerging markets’ currencies and gold to appreciate. “Most investors have too much dollar denominated assets or too much of their portfolio in developed countries. I don’t think that they have typically much gold in their portfolio. Gold is a form of money…The main theme now for investors is that if they diversify their assets into other assets, I think other assets will perform better. It will also lower the risk of their portfolio,” Ray Dalio said two days ago.

Seth Klarman is also concerned about runaway inflation and currency collapse. He must have been buying physical gold recently. Here is what he said in his investor letter:

“Yet another long-term risk confronts investors: the government’s fiscal and monetary experiments may go awry, resulting in runaway inflation or currency collapse. Bottom-up value investors would not wish to bet the ranch on a macroeconomic view, but neither would they be wise to ignore the macroeconomy altogether. Disaster hedging – always an important tool for investors – takes on heightened significance in today’s unprecedentedly challenging environment. Yet, as this insight is not unique to us, the cost of insurance is high. There are no easy ways to navigate these turbulent waters. But because the greatest risks are of currency debasement and runaway inflation, protection against a currency collapse – such as exposure to gold – and against much higher interest rates seem like necessary hedges to maintain.”