Finance Wanted.

By Douglas Glenn Clark

Here's how inflation could suddenly make today's outrageous gasoline prices seem like a bargain: the credit crisis deepens, loans of all kinds freeze and more major brokerage firms fearing implosion beg for a bailout. Bankruptcies of public companies and municipalities add salt to the financial wound and the federal government is forced to continue loaning cheap money to banks to balance the books.

Then, finally, there is no more money left. I know, that sounds impossible: no money in the federal coffers? But the fact is it does happen. Guess what the solution is? The Fed just prints more. And in the opinion of many money experts, ramping up supply of the lowly U.S. Dollar is a sure way to ignite one of our most feared enemies: rampant inflation.

We already know what inflation can do to our money. Inflation essentially eats greenbacks like a moviegoer eats popcorn. Speaking of movies and snacks, do you like how those prices continue to rise? The price of gasoline is a popular complaint, but there will be many other prices to complain about - including entertainment - when America becomes Inflation Nation.

Don't just stand there when the inflation fire starts consuming your life. Where there's a woe there's a way - for those who are willing to understand one basic concept and learn to accept a controllable risk.

Here's the concept: U.S. Treasury bonds hate inflation. Why? Inflation usually causes the Fed to raise interest rates in an attempt to cool the economy. When rates rise, bond prices fall.

Here's the controllable risk: Put options on U.S. Treasury bond futures. Why? Put options gain in value as the U.S. Treasury bond market price falls. When you buy a Put option, you only risk the money you have spent. It can't explode into a bigger, nastier loss in the manner of futures positions or other sophisticated speculative (think gambling) methods.

Now for the solution to rampant inflation: Learn to trade Put options on U.S. Treasury bond futures. Master this. Not only for protection against the inevitable flash flood of inflation. Master this market because when you do, you will always know how to protect yourself against changing tides in the economy - such as the rising cost of food, housing and necessities of all kinds.

You can also use Call options to exploit upward price moves in the T-bond market. But those days are behind us for now. We've already seen a major move up. Where were you? Possibly searching for a mortgage with a low interest rate. Fortunately, many homeowners benefited from low rates. But some folks are losing homes because they agreed to complicated adjustable-rate mortgages and can no longer afford their payments. Why? Inflation increased their monthly bill.

The haves and have nots both need protection. Master one market. And sleep a little easier.

Copyright 2008

Douglas Glenn Clark is the author of A Mortgage Liberator Guidebook: How to pay your bills as interest rates change. Free lessons and information at http://www.dgclarkgroup.com/portfolio.htm and his blog: http://www.afterthenoise.blogspot.com