We Study Billionaires - The Investor’s Podcast Network TIP473: Using Volatility to Hedge Against Inflation W/ Nancy Davis
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Sep 2, 2022 Nancy Davis, a renowned expert in volatility markets and portfolio construction, shares her insights on inflation hedging strategies. She discusses key indicators for determining inflation trends and how to leverage volatility markets effectively. Nancy explains the basics of bond convexity and explores innovative ETF products that outperform traditional methods like TIPS. The conversation also touches on the complexities of current fiscal policies and the implications of rising rates on investment strategies, emphasizing the need for diversification in uncertain economic times.
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Fed's Inaccurate Predictions
- The Fed's prior Jackson Hole predictions were inaccurate, particularly regarding inflation and labor market slack.
- Nancy Davis anticipates a more direct address of current inflationary pressures, impacting daily life and small businesses.
Protect Your Savings
- Include inflation in your portfolio to balance real-life expenses and protect your savings.
- Betting on inflation's direction is unwise; focus on diversifying your portfolio for various outcomes.
The Elephant in the Room: Fed's Balance Sheet
- The Fed's balance sheet reduction might impact fixed-income portfolios, especially those heavily invested in mortgages.
- Homeowners effectively hold a prepayment option, making mortgage holders short volatility.