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One of the (many) excuses that the bulls use to justify buying stocks at the present time is their belief that equities are a great hedge against inflation, particularly a hyperinflationary episode.

Whether or not we've reached the point where the prices of most goods and services are set to rise at a rapid rate (for the record, I don't think we're there -- yet), history suggests that timing is everything as far as this kind of hedge is concerned.

If, as the following chart (courtesy of A World of Possible Futures) reveals, you bought equities at the wrong point during the Weimar inflation of the early 1920s (i.e., September 1921), your portfolio took a gargantuan hit (i.e., roughly 85% in real terms through November 1922) before share prices began to catch up with what was happening on the ground.

Click to enlarge

Weimar_stocks

Hmmm. I wonder how many investors actually held on for the eventual recovery?

(Hat tip to Broad Oak Blog.)

Source: Market Timing Is Everything: A History Lesson