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Good question, Wpr. I actually think that inflation, as measured by the CPI has the potential to be relatively mild for the next year or more. Capacity utilization is a historically low levels and unemployment is still painfully high. These things are usually very disinflationary.

The only source of inflation that I see as a potential problem is a significant drop in the value of the U.S. dollar. It is possible that the value of the dollar will continue to fall as foreign countries are unwilling to or unable to fund the federal government's massive budget deficit. If this does happen, and it is very likely that it will if Uncle Sam does not reign in spending at some point, interest rates are headed higher and inflation at least in terms of hard assets will be a problem. I see the decline of the dollar as likely, but being much more gradual than the hyperinflation crowd thinks.

I am not a big fan of TIPS. They are too low-yielding for me. Besides, their increase relies upon the government's calculation of inflation...which is often understated.

I am not really a gold bug either. Yeah, I know, I know there's tons of people out there who will talk your ear off about how gold is the only "real" money, blah, blah, blah. That may be true, but gold never disappears. Just about every ounce of gold that has ever been dug out of the ground that isn't sitting on the bottom of the ocean in sunken chests still exists. It has very few, real-world uses other than for jewelry, and the demand for that will likely be restrained for some time to come.

The inflation hedge in my portfolio is oil. Not the USO, but dividend-paying E&P companies. Yes, oil demand is weak right now but oil, which is priced in dollars, will go up if the value of the dollar falls. Plus, unlike gold once oil is removed from the ground and used it disappears forever. As an added bonus, the supply of light, sweet, easy to access oil is being used up at a decent pace.

To protect myself from a decline in the value of the U.S. dollar I also like to have some exposure to companies that earn a significant portion of their revenue abroad (which is Global Gains' specialty), like Philip Morris International (PM).

Deej
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