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CNBC EXPLAINS

Prepare For a 10-12% Inflation: Stock Picker

Published: Wednesday, 5 Aug 2009 | 3:26 PM ET

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By: JeeYeon Park
CNBC.com Writer

The worst buys of the past few years, such as real estate and stocks, may prove to be the best investments a few years from now, said David Dreman, chairman and CIO of Dreman Value Management.

“I think we’re factoring in some pretty major inflation,” Dreman told CNBC.

“There’s been a report that there has been $21 trillion of new debt that was recently put out. The Treasury has been printing money 24-7 and that’s got to have its toll.”

Dreman predicted that this will lead interest rates to reach 10 to 12 percent in 2 to 4 years, which will be good news for stocks and real estate over time.

“We will see markets go down some and we’ll have volatility,” he said. “But all in all, we’re in a market that will go up much higher over the next 3 to 5 years.”

Dreman advised investors to look into oil, natural resources and exploration developer stocks; and to buy real estate.

Dreman Recommends:

Energy

Apache [APA Loading... () ]

Anadarko [APC Loading... () ]

BHP [BHP Loading... () ]

Chesapeake [CHK Loading... () ]

Financials

PNC Financial [PNC Loading... () ]

Wells Fargo [WFC Loading... () ]

JPMorgan Chase [JPM Loading... () ]

“They’re the survivors and over time, we’ll see some pretty good results,” Dreman said of the financials.

“They’re starting to work through the worst of the bad debts. There might be another year-year and a half of lackluster earnings but we should see much higher earnings over time. Financial stocks do go up with inflation.”

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Disclosure:

No immediate information was available for Dreman or his firm.

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