Rob Arnott's Inflation Protected Portfolio

Market Watch has an interview with Rob Arnott, founder of Research Affiliates, about his economic outlook and his portfolios allocation.  Arnott says the "3-D Hurricane" - a combination of deficits, debt, and demographics - is setting the U.S. economy up for a slow growth environment that is likely to b e accompanied by the inflation of deliberate debasement of the dollar.  His ideas for portfolio protection:

1. Rethink Asset Allocation - A traditional 60/40 allocation will disappoint.  Diverting some of the equity allocation to inflation hedge is cheap insurance.  Given the specific recommendations, I can understand this suggestion.  However, given that inflation is a covert transfer of wealth from lenders to borrowers, I would be inclined to reduce the fixed income allocation.
2. TIPS - Bonds tied to inflation should perform "decently" in an inflationary environment, and that is what an investor needs.  He cites the 1.8% spread available on the 30-year TIPS as comparable to what has been available to long Treasuries over the past ten years.  What isn't mentioned is that this spread is about the smallest it has been since the Treasury started issuing TIPS.  Purely defensive.
3. Commodities - With a nod to the drawbacks of commodity investments - volatility, prices reflecting expected inflation, speculation-driven prices - Arnott reminds us that commodities are an effective hedge against unexpected inflation.  While this could be argued at the stretched prices we have seen last year and earlier this year, the recent pullback of prices in the agricultural and energy sectors signal that this could again be an effective inflation defense.
4. Emerging Markets - Representing 40% of world GDP and only 10% of world debt,  emerging markets, both debt and equity, emerging markets have three factors in their favor: high growth, low leverage, and commodity exposure.  It could easily be argued that emerging market exposure in the equity portion of a portfolio is sufficient inflation hedge that no other is needed.
5. High Yield Bonds - As a fixed income instrument, junk bonds would not be expected to be a very good inflation hedge.  Arnott makes the argument that inflation improves the nominal performance of the issuer, potentially improving the credit quality of the bond.  On the other hand, this low growth economy that he forecasts could create struggles for companies of dubious credit.  Be wary.