David Einhorn of hedge fund Greenlight Capital recommends investors bet on inflation staying high despite the current high-interest rate backdrop. Standing...
David Einhorn of hedge fund Greenlight Capital recommends investors bet on inflation staying high despite the current high-interest rate backdrop.
Given the setting, which supports the Federal Reserve’s case that rates will remain higher for longer, Einhorn said he prefers the one-year inflation swaps. They were priced at 2.8% at the end of September, according to the Federal Reserve Bank of Cleveland. Inflation swaps are agreements where investors pay a party a fixed interest rate and in return receive a floating rate payment that moves based on actual inflation. The tool is used mainly by financial institutions to hedge against risk.
For those that can’t do swaps, Einhorn recommends buying TIPS, or Treasury inflation-protected securities. “It gets you the same exposure,” he said.
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