Financial Repression: Part II

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Financial Repression.  What is it?

“Financial repression is a set of government policies—such as interest rate caps, capital controls, and bank regulations—that channel household savings into funding government debt at below-market rates. It acts as a “stealth tax” on savers to reduce high public debt burdens, often resulting in negative real interest rates where inflation exceeds interest income.”

How is an investor to prepare for what is likely to take place in the investing world over the next one to two decades?  Below is a sample portfolio.  Register as a Guest (free) if you wish to see this sample portfolio.  There is no trick into paying sometime in the future.  This is a free blog to those who register and are then elevated to the Platinum level.

1. We begin setting up this Financial Repression (FR) portfolio with a broad U.S. ETF, VTI’

• VTI (15%) provides us with pricing power.  We want to be involved in the market.  This ETF holds companies that can pass on inflated prices to customers.

2.  VXUS (10%) provides some currency diversification as this exposes us to international equities.  If the dollar weakens, as is almost sure to be the case, VXUS provides diversification, although the USA is not the only country with a debt problem.

3.  Gold (GLD or SGOL) (10%) historically benefits when real rates are negative.  One might invest 5% in each of the mentioned ETFs.

4.  DBC (10%) or broad commodities.  Since I don’t like dealing with this ETF when it comes tax time I plan to use this ETF in tax deferred accounts.  DBC is a direct inflation counter.  In a taxable account one might break this 10% allocation into Health (VHT) and Consumer Staples (VDC).

5.  GNR (8%) – Global natural resources includes companies tied to commodities that will frequently outperform in inflation cycles.

6.  VNQ (8%) – U.S. Real Estate.  Property frequently expands along with inflation.

7.  SCHP (12%) – TIPs adjust for inflation.  This ETF is a core defense against inflation.

8.  FLOT (7%) – Floating rate bonds will reset upward as interest rates rise.

9.  IGF (10%) – Infrastructure such as utilities, pipelines, etc. are often tied to inflation contracts.

10.  XLE (10%) – Energy tends to lead during inflation spikes.

There you have a ten (10) ETF portfolio designed to combat the likely scenario of Financial Repression.

I’ve listened to several YouTube videos with a similar message.  I don’t know if this video as well as those with an identical message are AI generated.  Just beware as you listen to this information and try to confirm the advice from other sources.