There are still those dogged souls who think inflation is a mere blip, that will pass as soon as raw material prices stop rising. But their number is dwindling - in the markets at any rate. So it is opportune to ask how investors can protect themselves.

Let us begin by recalling that inflation throws some basic investment rules out of the window. Diversification in particular no longer works. This is true across financial asset classes, from bonds and equities to real estate. Prices must fall to reflect lower real income streams.