From Dan Ferris in the S&A Digest:

[On recent signs of inflation…] All my utility bills have gone up. If it weren't for Wal-Mart, my grocery bill would have gone way up, too. On my trip to New York earlier this week, I ate at McDonald's every day to save money.

The day after I paid almost $8 in Times Square for a Big Mac, fries, and a Coke, Bill Ackman of Pershing Square Capital Management, speaking at the Value Investing Congress, said he doesn't own gold because he'd rather own stocks like McDonald's and Automatic Data Processing (an Extreme Value pick), both of which are excellent ways to counteract the effects of inflation, due to pricing power and the ability to earn a yield from float.

Murray Stahl of Horizon Asset Management has been saying for years that many financial stocks are good inflation hedges. He calls these stocks "croupier businesses," because, like ADP and Visa, their earnings skim something off the top of the movement and/or have custody of hundreds of billions or even trillions of dollars. Inflation means more dollars in existence, ergo, the croupiers' earnings, as a group, will always keep pace with inflation.

Crux note: Dan Ferris is the editor of Extreme Value, and he's currently recommending a true rarity in the gold industry - a deep value gold stock with the potential to return 28 times your money. Learn more about Extreme Value here...

More on investing during inflation:

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