7 Inflation Resistant Stocks(MO),(BRL),(HRL),(SJM),(JNJ),(KMB),(RAI)

Inflation Resistant Index: MO,BRL,HRL,SJM,JNJ,KMB,RAI

Ready for Uber-Inflation? The Obama administration and Congress will soon call on Ben Bernanke at the Fed to demand that he create more dollars. Lots and lots of them. The Fed is already talking of buying longer-term Treasurys to support the market, so it will be more of the same. Much more.

And what will be the result? Well, the product of this sort of thing is called inflation. The Fed's outpouring of dollar liquidity after the September crash replaced the liquidity lost by the financial sector and has so far caused no significant uptick in consumer prices. But the worry lies in what will happen next.

Even when the economy and the securities markets are sluggish, the Fed's financing of big federal deficits can be inflationary. We learned that in the late 1970s, when the Fed's deficit financing sent the CPI up to an annual rate of almost 15%. That confounded the Keynesian theorists who believed then, as now, that federal spending "stimulus" would restore economic health.

Inflation is the product of the demand for money as well as of the supply. And if the Fed finances federal deficits in a moribund economy, it can create more money than the economy can use. The result is "stagflation," a term coined to describe the 1970s experience. As the global economy slows and Congress relies more on the Fed to finance a huge deficit, there is a very real danger of a return of stagflation. I wonder why no one in Congress or the Obama administration has thought of that as a potential consequence of their stimulus package.

Inflation is not good for the overall stock market, but some stocks are more inflation-resilient, particularly those of businesses that provide necessities (food, personal care products, pharmaceuticals) or low-cost gratification (alcohol, tobacco). These categories tend to hold their own in inflationary times because people must continue to purchase basic items to live or enjoy affordable at-home entertainment.

Here are the 7 stocks in the Stockmasters Inflation Resistant Portfolio: