Is there a way for an individual (i.e., excluding institutional tools and using only consumer products) in the U.S. to hedge inflation over the long term greater than that measured by CPI-U? Specifically, for a household that expects higher inflation because their spending is not well represented by CPI-U, is there a way to hedge more than TIPS bonds would? I'm not interested in short-term hedges like leveraged TIPS ETFs but a way to hedge throughout retirement, for example.
All of your ideas are greatly appreciated. I was asked if it is possible for a retiree to hedge inflation risk greater than CPI-U. My guess was that it is not because the U.S. Treasury absorbs CPI-U inflation risk but I'm unaware of a counter-party that would hedge more risk. CPI-E is experimental and runs about 50 basis point higher than CPI-U I believe, mostly due to higher healthcare costs.
The reason for my question was to find out if there is any hedge that could approximate CPI-E or thereabouts. The head of a financial engineering department told me that he agreed with my assessment that there is none (and further noted that most inflation hedges are inefficient in practice).
Rather than stating that there is no way to hedge inflation greater than CPI-U, I suppose I should state that I have been unable to find one.
Thanks for all your comments.
No individual instrument - but if you look at the differences between said households basket and the aggregate CPI-H basket and identify the difference you can potentially look to hedge price increases by use of other retail instruments e.g.; natural gas futures, agriculture commodities/etfs, retailers etc.