Kevin Duffy on hyperinflation, gold, stocks and optionality

Gold has option value or “optionality.”  It has extreme value under the rare sample path. It just so happens that this path could devastate our savings which are irreplaceable.

The same option value math applies to shares of businesses that will survive a hyperinflation. The challenge is that many won’t. There is the rub.

Robust businesses deserve an inflation premium, whereas there is little value in “short duration assets” unable to withstand a severe economic shock.

~ Kevin Duffy, The Coffee Can Portfolio, August 11, 2020