Seth Klarman on Gold Part 2

So what then would be a good hedge against inflation if Gold isn't quite doing the trick?

The second part of Mr Klarman's answer as to that question is real assets.

Let's examine what real assets are: Investopedia defines real assets as "Physical or identifiable assets such as land, equipment, patents, etc."

The only way one can gain ownership of many of these assets is through ownership of REITs or companies that use patents or manufacture equipment.

I submit to you that ownership of companies that own real assets is one way of combating the bit of inflation on your assets. This means not every company is going to benefit from inflation. Only the ones with real assets that can raise prices when inflation comes around.

The problem with most companies is that in an inflationary period, they raise their prices but they also suffer from increased costs. So at best, they can pass on their increased costs to their customers. Or they might not be able to pass on the full cost increase to their customers and it'll start to eat into their profit margin. That would really be bad. There's a good piece by Buffett on this issue.

So you're look for companies that really have pricing power, you'd be looking at monopolies, at companies selling commodities and at real estate related companies. Finally, inflation protected securities or inverse treasury ETFs.

The last two are a bit iffy. Simply 'coz Treasury Inflation Protected Securities (TIPS)'s yield is linked to the CPI index. The CPI index is a poor tracker of inflation because it doesn't have the price of oil in the index. Inverse Treasury ETFs are also difficult because the yields might not exactly match inflation.

So the time is now for us to starting hunting. I've defined the areas so we need to do our digging in those areas.